Treasury Secretary Janet Yellen put down the Jing-A Brewing Co. beer and chopsticks and returned home from China, transforming into a social media celebrity in the process. In her second visit to the world’s second-largest economy, Yellen touched upon several vital subjects, particularly international trade and green energy. This time, however, the senior administration official was not high on psychedelic mushrooms.
Yellen Goes to China
Yellen enjoyed a four-day visit to Beijing, meeting with several high-level Chinese Communist Party (CCP) officials, most notably Vice Premier He Lifeng and People’s Bank of China (PBoC) Governor Pan Gongsheng. While the public will wait to see if these meetings will result in anything fruitful, Yellen’s remarks have signaled that US-China trade tensions will remain the same. As Liberty Nation recently reported, Yellen hinted that Washington could apply tariffs because Beijing is flooding the world with cheap green energy products.
The White House is perturbed that China uses subsidies and other public policy support mechanisms to bolster manufacturing efforts surrounding electric vehicles and solar panels. Indeed, the CCP has expanded factory investments to foster more capacity amid a slowing economic landscape. But Yellen says this is “overcapacity” because the production initiatives exceed what the domestic market can absorb.
She warns this could threaten US companies and put many out of business. “It’s fine for China’s firms to export in this industry, to develop it, but some of the techniques that they use, subsidizing their firms very heavily and then supporting them when they’re losing money when demand is weak relative to this great capacity to supply products like solar panels, prices just plummet, and it can drive our firms out of business,” Yellen told CNBC.
Who is going to inform her that this is the basis of Bidenomics? Since January 2021, President Joe Biden and the Democrats have ushered in three landmark pieces of legislation that function as corporate welfare: the Inflation Reduction Act, the US Chips and Science Act, and the Bipartisan Infrastructure Law. These bills have handed out hundreds of billions of dollars in generous tax credits, grants, and other federal subsidies to US and foreign companies, even Chinese organizations. Plus, this federal funding is in addition to the state and local fiscal efforts, too.
Joe Biden (Photo by Andrew Harnik/Getty Images)
In the same CNBC interview, Yellen conceded that all options were on the table to prevent China from dumping cheap, subsidized goods on the open market, whether in Europe or the United States. This ostensibly includes tapping into tariffs. “I wouldn’t rule anything out at this point. We need to keep everything on the table. We want to work with the Chinese to see if we can find a solution,” she stated. “Many countries have ways of investigating dumping, preventing it by putting tariffs in place, and that’s something that WTO [World Trade Organization] rules permit.”
Other issues she spoke about with her US counterparts were TikTok, national security matters, and illicit finance. It is more than likely that Secretary of State Antony Blinken will discuss similar topics when he visits China. Yellen limited what transpired in her powwows, but she admitted that resolving these topics would not happen “in an afternoon or a month, but I think they have heard that [these are important issues] to us,” Yellen added.
‘Feel Great About Our Economy’
While the American people have not yet received a comment from Yellen regarding the fourth consecutive hotter-than-expected inflation reading in March, she did tell the business news network that the country can “feel great about our economy.” The labor market is solid, “inflation is coming down,” and the gross domestic product (GDP) growth rate remains strong, she pointed out.
“I think we’ve got a good, strong economy,” she said. “There’s always recession risk. Geopolitical developments could create risks to our economy. But I think we’ve got a good, strong economy that’s on a solid track.”
Last month, the annual inflation rate climbed to 3.5%, higher than the consensus estimate of 3.4%. The core consumer price index (CPI) was unchanged at 3.8%. Services inflation was above 5%, while the Federal Reserve’s preferred supercore inflation ex-housing metric also climbed to a three-month annualized rate of 8%. This has impacted how investors anticipate where interest rates will venture by the year’s end. The growing talk on Wall Street is that the Eccles Building will delay the first rate cut again and potentially avoid a reduction to the benchmark policy rate altogether in 2024. Ouch.
Got Mushrooms?
The press and social media audiences were obsessed with what Yellen ate and drank during her stay in China. Who can blame them? As has been the case for the last three years, these official state visits have hardly elicited any achievements, with both superpowers jockeying for position on every front, be it economics or military. Considering the state of the US economy, consumers might need to get their hands on some of those psychedelic mushrooms Yellen consumed last year.
