Yellen: China Has Failed To Address Unfair Trade Practices That Triggered Tariffs

Treasury Secretary Janet Yellen says that China has failed to address unfair trade practices which triggered US tariff hikes, and that the "underlying concerns" remain. When asked if the US is prepared to "de-escalate" tensions with China, Yellen indicated that tariff reductions aren't on the table.

"I would emphasize that really the underlying concerns we have have not yet been addressed, and we need to work on that going forward," Yellen told Bloomberg television on Monday, just hours after a raft of Chinese economic data came in weaker than expected.

"We put tariffs in place on China because we had underlying concerns about unfair trade practices, particularly those affecting intellectual property and technology transfer."

Yellen added that any moves by the United States to curb outbound US investments to China would be narrowly targeted and based solely on national security considerations.

"There is a good chance that we will" go forward with controls on outbound investments, but that it will focus on semiconductors, quantum technology and AI.

Meanwhile, Yellen insisted that while China's economic slowdown risks causing ripple effects throughout the global economy, she doesn't expect a recession in the US.

"Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia — and slow growth in China can have some negative spillovers for the United States," said Yellen, adding that in the United States, "growth has slowed, but our labor market continues to be quite strong — I don’t expect a recession."

Yellen insists that the economy is on a "good path" to curb inflation without a major weakening in the labor market.

Last week’s report on consumer prices was “quite encouraging,” Yellen said. Wednesday’s release showed that prices, excluding food and energy, rose 0.2% in June from the previous month, for the smallest advance since August 2021. Headline inflation ran at a 3% annual pace, well down from last year’s peak above 9%. -Bloomberg

"The labor market’s been so strong, it has encouraged more prime-age people to enter" the workforce, which would reduce pressure on the market, said Yellen, adding: "Wage growth is moderating and inflation is subsiding."

Yellen also noted that Chinese consumer spending was "relatively weak" amid a relatively slow economic rebound from the country's zero-Covid lockdown policy. Monday's figures revealed that GDP rose less than 1% vs. Q1 2023, while retail sales rose less than forecast for June.

"It looks like consumers are more focused on building back their savings buffers," said Yellen.