Treasury Secretary Yellen Doesn’t Expect a Recession in US

By Bryan Jung
Bryan Jung
Bryan Jung
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.
July 18, 2023Updated: July 18, 2023

U.S. Treasury Secretary Janet Yellen said during an interview that the U.S. economy would not be hit by a recession.

While Ms. Yellen was in attendance at a G-20 summit in Gandhinagar, India, she told Bloomberg on July 17 that the United States was making good progress in bringing inflation down this year.

Ms. Yellen was at the conference of finance ministers while also attempting to ease tensions with Beijing.

Her comments come two weeks after she committed a diplomatic gaffe during her visit to Beijing on July 3, when she bowed to her Chinese counterpart multiple times without reciprocation, which was seen as a sign of weakness.

Along with the meetings of the G-20 and a separate gathering with finance ministers from the G-7 developed economies over the weekend, Secretary Yellen used the visit to meet with her counterparts from India, Turkey, and the European Union.

At the same time, she said she did not know about the recent hacking of Commerce Secretary Gina Raimondo and other government officials emails by a group Chinese hackers.

She said that she did not discuss it with Chinese officials, but said the White House had raised its concerns with Beijing.

China’s Economy Sees Disappointing Results, While US Remains Steady

Data this week showed that the Chinese economy came in weaker than expected last quarter.

China’s GDP grew 6.3 percent in the second quarter on a year-over-year basis, from 4.5 percent growth in the first quarter, but well below the target of 7.3 percent, as domestic and foreign demand slackened.

Secretary Yellen claimed that slower growth in China could spill over to other economies, but that the American economy was on “a good path” to reducing inflation while the labor market remained strong.

Ms. Yellen attributed “relatively weak” Chinese consumer spending to the slow economic rebound following the country’s post-pandemic reopening.

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

“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,” she added.

Ms. Yellen said that data released in June showed that U.S. GDP increased at an annualized rate of 2 percent in the first quarter was encouraging.

Last month saw a sharp upward revision from the pace of 1.3 percent reported earlier, but it was still below the 2.6 percent growth reported in the fourth quarter.

“For the United States, growth has slowed, but our labor market continues to be quite strong. I don’t expect a recession,” Yellen said self-assuredly, adding that “the most recent inflation data were quite encouraging.”

Inflation ran at an annual pace of 3 percent, well down from last year’s peak of 9.1 percent.

“The labor market’s been so strong, it has encouraged more prime-age people to enter” the workforce, taking some of the heat out of the market, she said.

“Wage growth is moderating and inflation is subsiding.”

Yellen Says That Sino-American Trade Policy Will Remain Consistent

The secretary downplayed any chance for U.S. tariff cuts or reductions as part of the Biden administration’s push to improve relations with Beijing.

Ms. Yellen told Bloomberg that while the Biden administration is prepared to do to “de-escalate” tensions with China, she added that tariff reductions would not be on the table.

She said that building on the “groundwork” of her July visit to China was among her objectives and that she wants more focus on debt relief for poorer nations and reforms to multilateral development banks.

Ms. Yellen admitted that Chinese officials raised serious concerns, especially regarding tariffs, during her visit to Beijing earlier this month.

She said that the underlying reasons why tariffs were implemented in the first place was due to unfair trade practices by China, which had not been addressed.

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

She said U.S. technology restrictions aimed at China were not meant to be “tit for tat,” but mainly due to national security concerns.

“We have to see what comes out of the four-year review” of the previous Trump administration’s tariffs, said Ms. Yellen.

“But I would emphasize that really the underlying concerns have not yet been addressed. And we need to work on that going forward.”

The Treasury chief also said that any moves to curb American outbound investment to China would be narrowly targeted and based solely on national-security considerations.

Beijing is worried that this would focus narrowly on three technological sectors: semiconductors, quantum computing, and artificial intelligence.

“They would contain a combination of notification requirements, and in a very narrowly scoped portion of these sectors, prohibitions, but these would not be broad controls that would affect U.S. investment broadly in China,” she said.

When asked if the Biden administration was ready to act, Ms. Yellen said, “We want to make sure that we get it right, and we’ve been working on the details.”

“There is a good chance that we will” go ahead with controls on outbound investments, she said, but that it would come with a notice of proposed rulemaking, giving American companies a chance to comment on any future controls.

Reuters contributed to this report.