Expert Predicts Trump's Tariff Will Ruin the US Economy — Is He Correct?

Former Treasury Secretary Janet Yellen has issued a sharp warning about Trump tariffs. If Donald Trump revives or escalates his tariff-heavy trade policies, it could trigger severe damage to the US economy. 

Trump’s proposed tariffs, aimed at countries like China and Vietnam, are being criticized as “unclear and not at all sensible,” with potential to unravel both investor confidence and household stability across the US.

Yellen Sounds the Alarm: Tariff Chaos Ahead?

In a recent series of interviews with Bloomberg, CNBC, and CNN, Janet Yellen didn't hold back. The former Treasury boss and Federal Reserve chair called Trump’s trade policy one of the “worst self-inflicted wounds” she’s seen in her decades-long career. 

She emphasized that keeping tariffs in place—or introducing new ones—will strain American households, disrupt business planning, and erode trust in the US as a global economic leader.

While trade wars under Trump were nothing new during his first term, what makes this round more troubling, according to Yellen, is how unpredictable the policy framework appears to be. 

In her words, “We’re in a world of tremendous uncertainty,” where businesses and consumers feel “paralyzed” by the lack of direction.

Read also: Exposing Trump’s Market Manipulation and Its Impact on the Crypto Market

A Closer Look: How Tariffs Work and Who They Hurt

Tariffs are essentially taxes placed on imported goods, intended to make foreign products more expensive and encourage local production. But here’s the catch—those extra costs often fall on American consumers and businesses. 

Yellen pointed out that, far from punishing foreign manufacturers, many of Trump’s past tariffs ended up increasing prices at home, particularly on everyday essentials and industrial inputs.

She also criticized the inconsistency of the administration’s targets. For instance, Vietnam—once seen as a strategic alternative to China in the supply chain—was suddenly hit with tariffs as well, leaving industries confused and scrambling.

This confusion doesn’t just hurt trade. It also chips away at America’s reputation as a stable economic partner. Yellen noted that a prolonged tariff war could cause countries to “decouple” from the US, seeking more reliable trade relationships elsewhere.

Markets React: Dollar Drops, Confidence Wavers

If you’re wondering whether this is just political talk, think again. The financial markets are already reacting. Over the past weeks, US Treasury yields—typically seen as a safe haven—have risen sharply, while the dollar has weakened. 

This unusual combo, according to Yellen, suggests that global investors are starting to lose confidence in the US economy and its leadership.

“Normally, uncertainty makes investors run to the dollar,” she explained. “But that’s not what we’re seeing. Investors are beginning to shun dollar-based assets.” That’s a worrying sign, especially since the US dollar serves as the backbone of the global financial system.

Yellen also mentioned that while the Federal Reserve isn’t ready to intervene yet, any further destabilization—especially from erratic trade policy—could push them to reintroduce liquidity tools used during past economic shocks.

Read also: US vs China: How This Trade War Will Destroy the Global Economy

The Real Risk: Economic Isolation

At the core of Yellen’s warning is the fear of economic isolation. Tariffs don’t just raise prices—they create friction. 

If the US becomes seen as an unreliable trade partner, other countries may begin forming trade networks that exclude American businesses, weakening the country’s influence in the global economy.

And this isn’t just theoretical. China has already shown signs of wanting to de-escalate tensions, while quietly building stronger trade ties with Europe and other parts of Asia. If the US doesn’t offer stability and clarity, it could lose its seat at the head of the global economic table.

FAQ

Q: What are tariffs and how do they affect the US economy?
A: Tariffs are taxes on imported goods. While they aim to protect domestic industries, they often lead to higher prices for consumers and can disrupt international trade relations.

Q: Why is Janet Yellen critical of Trump’s tariff policies?
A: Yellen believes the policies are unclear and counterproductive, increasing uncertainty for businesses and damaging global confidence in the US economy.

Q: How have markets reacted to the tariff concerns?
A: Treasury yields have risen and the dollar has weakened—an unusual sign suggesting investors are losing faith in the US as a safe economic bet.

Q: Will the Federal Reserve step in if things get worse?
A: According to Yellen, the Fed might consider using its liquidity tools if financial stability is threatened, but it's not at that point yet.

Q: Is there a chance the tariff policies could change?
A: Yes, depending on the outcome of elections, global trade negotiations, and economic feedback, future administrations could alter or reverse current tariff strategies.