Market News

Janet Yellen warned that the risk of a U.S. recession has “gone way up” after Donald Trump’s sweeping tariffs rattled financial markets, consumers and businesses.

The former U.S. Federal Reserve chair said in an interview with the Financial Times that the tariffs on major trading partners will have “tremendously adverse consequences” for American consumers and firms.

“I’m not yet ready to say that I’m forecasting a recession, but certainly the odds have gone way up,” Yellen said. She added that targeting Chinese goods could “hobble” American industries by curtailing the supply of critical minerals.

Her comments came after figures on Wednesday revealed that the U.S. economy contracted in the first quarter as firms boosted imports to stockpile goods before the April 2 tariffs announcement. The 0.3% drop in GDP on an annualized basis was the U.S.’s worst quarterly performance in three years.

Yellen — who also served as U.S. Treasury Secretary under Joe Biden — is the latest to warn of a rising risk of recession after U.S. business and consumer confidence surveys tumbled in response to the tariffs.

While Trump has handed many countries a temporary reprieve from the highest tariffs first unveiled last month, the U.S. president remained defiant on Wednesday, saying the turbulence seen in markets has “nothing to do with tariffs.”

Yellen warned that the U.S. is “highly dependent on China for most of the critical minerals that go into clean energy technologies, batteries and the like.”

“By putting enormous tariffs on them, I think we potentially hobble industries that could have a chance,” she said.

Tom Rees, Bloomberg News