Inflation Slowdown Hampered as Yellen Warns of Tariff Repercussions
Former U.S. Secretary of the Treasury Janet Yellen warned on Thursday that although U.S. inflation has recently cooled, a new round of tariffs set to be implemented by Trump might reverse this trend, pushing the inflation rate back up to 3% and eroding the real income of ordinary American families.
In her speech, she explicitly stated, "I expect inflation to increase year-on-year by at least 3% this year, possibly higher, primarily driven by tariffs." Yellen believes that while the details of the tariffs are yet to be fully disclosed, their upward pressure on prices is almost inevitable.
Household Income May Decrease by Thousands, Purchasing Power at Risk
Yellen pointed out that the new round of tariff policies will weaken consumer purchasing power, leading to a reduction in real household income in America. She cited model predictions, stating that even in the "most optimistic" scenario, each American household's annual income could reduce by about $1,000.
She added a warning: "If the tariffs are more extensive and stronger, this figure could be well over $1,000." This viewpoint starkly contrasts with the Trump camp's assertion that "tariffs will not harm American consumers."
Trump Rebuts Tariff Impact, Claims Falling Inflation Supports Rate Cut
Meanwhile, Trump's side insists that tariffs are an important tool to revive American manufacturing and address unfair trade, and they will not exacerbate domestic inflation. Recently released CPI data shows U.S. inflation in May rose 2.4% year-on-year, slightly below expectations, giving Trump another opportunity to criticize Federal Reserve Chairman Powell, demanding a 1% rate cut.
In a rare move during a public event at the White House, Trump directly called Powell a "fool," further intensifying the tension between the government and the Federal Reserve.
Federal Reserve Remains Watchful, Evaluating Tariff's Long-term Effects
Yellen also reminded that the Federal Reserve should remain vigilant, particularly focusing on the "second-round effects" triggered by tariffs, such as rising labor costs and adjusted inflation expectations. She indicated that it is still difficult to fully assess how tariffs will transmit to the labor market and inflation levels, so the Fed is likely to continue taking a wait-and-see approach.
She explicitly stated, “Despite strong political pressure for rate cuts, the Federal Reserve will still prioritize the direction of economic fundamentals rather than political signals.”
Expert Concerns: Policies Are Not Just Trade Issues, They Affect Livelihoods
Wall Street analysts have pointed out that Yellen's comments have once again highlighted the profound impact of trade policies on the macroeconomy. Against the backdrop of an incomplete recovery in the global supply chain and fragile consumer confidence, the expansion of tariffs could not only drive up the prices of imported goods but also suppress business investment and household consumption.
An economic advisor candidly stated, "This is no longer merely a trade policy game; it has become a direct factor affecting Americans' daily lives." He emphasized that policymakers should weigh the actual impact on the economic pressure of ordinary families while advancing their strategic goals.
Conclusion: The Shadow of Inflation Re-emerges, Economic Policy Path Faces Choices
As Trump’s tariff policies accelerate and the trend of slowing inflation faces reversal, the tug-of-war among the Federal Reserve, the government, and the market will become increasingly complex. Should interest rates be cut to ease the economy, or should caution be exercised against re-escalating imported inflation? Every step of the Federal Reserve will tread a tough path between high-pressure politics and actual data.
