Investing.com -- Former U.S. Treasury Secretary Janet Yellen said Thursday that mounting stress in the U.S. Treasury market likely influenced President Donald Trump’s decision to partially pause his sweeping reciprocal tariffs.
In her first televised interview since leaving office, former Fed chief Yellen warned that the recent surge in yields and selling pressure among highly leveraged hedge funds holding Treasury debt could pose a serious risk to financial stability.
“It caused highly leveraged hedge funds that hold U.S. Treasuries to begin to sell their holdings,” Yellen told CNN International. “That’s something that could really begin to trigger financial instability if there is massive sales of U.S. Treasuries.”
She added, “My understanding is that this is something that was an influence on President Trump in getting him to pause the reciprocal tariffs, and it’s certainly something that should be of concern.”
Yellen, who led the Treasury under President Joe Biden, also criticized Trump’s economic strategy more broadly, calling it “the worst self-inflicted wound by a well-functioning economy in history.”
Her remarks come a year after she delivered a key address in Beijing warning that a complete U.S.-China economic decoupling would be “disastrous for both.”
With Trump now pushing tariffs of more than 120% on Chinese goods—and Beijing responding in kind—Yellen’s warnings are becoming reality.