WHEN: Today, Monday, April 8, 2024
WHERE: CNBC's "Worldwide Exchange" – Live from Beijing
Following is the unofficial transcript of a CNBC exclusive interview with United States Treasury Secretary Janet Yellen on CNBC's "Worldwide Exchange" (M-F, 5AM-6AM ET) today, Monday, April 8. Video of the interview will be available on CNBC.com.
All references must be sourced to CNBC.
U.S. TREASURY SECRETARY JANET YELLEN: Well, they certainly listened and I think they understood that this is something that's very important to the U.S., but as I emphasized and I think they've also heard, we're not the only country that's concerned about a flood of Chinese exports wiping out important firms and industries in our country. And clean energy is something that is an innovative area that will be growing over time. We want to make sure that this is an opportunity for our workers and our firms to participate in this industry. Europe, Japan, other countries feel the same. It's fine for Chinese to, 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. And this is something that's unacceptable from the U.S. point of view and many of our allies feel the same way. So, I think that they understand it. It's been part of their industrial strategy. It reflects the importance that they attach to advanced manufacturing. It also reflects a shortage of demand in their economy so that they are investing heavily in manufactured goods that can be exported. And these are things that really can lead to trade tensions going forward which we would like to avoid.
SARA EISEN: Well, I was going to ask if you actually expect them to do anything about it. Already, there was a headline today that the commerce minister in China said that those accusations are groundless.
YELLEN: Well, I do think that they understand where we're coming from and they have agreed to continue in intensive dialogue on this issue. I think they understand it's important and they do have tools that they can use perhaps that it will take a while to have an effect.
EISEN: Like export restrictions?
YELLEN: Well, I'm not thinking so much of export restrictions as some shifts in their macroeconomic policy and the reduction in the amount of particularly local government subsidies to firms in these industries.
EISEN: I was going to ask what's at stake economically because -- I mean, the world need -- don't we need green technology? We need EVs. We need solar panels. It's been a big push by the Biden administration. So, what are you afraid of?
YELLEN: Well, we do and there's going to be a growing, we expect and we hope because we want to deal with climate change. We expect a global economy in which the demand will be increasing. And there's nothing wrong with investing in these industries and developing capacity.
EISEN: Because we do it, the Inflation Reduction Act.
YELLEN: We do it, too. We just want to make sure that we're not driven out of business and that our firms and workers have opportunities in these industries which will be important ones in our future.
EISEN: If they don't shift, are we looking at potential tariffs on these products?
YELLEN: Well, 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. We are engaging in a four-year review of Section 301 tariffs. That's not complete, so I can't really speak to what will come of it. I wouldn't rule anything out, but I think we need to deal with the issue.
EISEN: Those were the tariffs that were imposed during the Trump administration—
YELLEN: That's right. That's right.
EISEN: That you've kept. Are they still very concerned about that? Did you hear about that in the meetings?
YELLEN: They usually raise the issue of the 301 tariffs. They've said for a long time that they would like to see them reduced. Of course, they were put in place because there were findings of unfair trade practices against the United States. And the Vice Premier He, who's my counterpart, and I have agreed that while trade and investment between our two countries is beneficial and desirable, it needs to be on the level playing field. And in a number of ways, we feel it's not. So, we're really raising this issue in that context. We also feel, especially after the pandemic, that the resilience of our supply chain is something we need to take more, pay more attention to, and being overly dependent on any single country for a very important good that's used in your economy can lead to a dangerous fragility in the supply chains. And in the case of some of these clean energy goods, electric batteries, the minerals that go into them, solar panels, we have been very, very heavily dependent on China. And that's another reason that we and other countries want to have some domestic capacity ourselves.
EISEN: You mentioned other countries, but China has been flooding Europe, for instance, with cheaper EVs. Can you blame Europe which doesn't have as much growth right now as the U.S. for having closer trade ties with China?
YELLEN: Look, I mean, Europe and China do have close trade ties. Europe benefits from exports to China. But on the other hand, the car industry is very important in countries like Germany. Europe doesn't want to see these industries destroyed. They're an important source of jobs and very valuable ones with good pay.
EISEN: Should they increase protections to prevent all of these EVs from flooding their market?
YELLEN: They have started an investigation of whether or not there's dumping of electric vehicles by China in their markets. And, you know, many countries have ways of investigating dumping, preventing it by putting tariffs in place and that's something that WTO rules permit.
EISEN: We have tariffs. We haven't seen Chinese EVs in the U.S. Should they be allowed to sell their EVs in the United States?
YELLEN: I mean, they are allowed to sell their EVs in the United States. We don't have rules against it. Again, in that area as well, we are trying to foster a domestic industry. We are certainly open to imports, including those from China. There are no rule against China selling EVs in the United States.
EISEN: But we have higher tariffs on them than Europe.
YELLEN: We, we do, we do have tariff, tariffs on them, I believe. But, you know, this is for us an important industry.
EISEN: You also spoke about TikTok in some of the meetings. And I, and I am curious what the Chinese reaction is to the legislation that President Biden did say he would sign if it passes Congress.
YELLEN: Well, I think this is an important and profitable company and I think they're concerned by the prospect they would be forced out of the United States or what the legislation really requires is that they would sell the company to a domestic purchaser.
EISEN: Yeah.
YELLEN: So I think they certainly have concerns about that.
EISEN: Do you think the Chinese government will allow the U.S. assets sold to U.S. investors or a U.S. company?
YELLEN: I honestly don't want to get, to get ahead of where we are on this. The president has said he would sign the House legislation.
EISEN: You also brought up matters of national security on this trip and said that there would be consequences for China if they increased support, militarily for Russia. And we also heard this week reportedly from Secretary of State Antony Blinken who said that was happening on the large scale. So, are we looking at sanctions on Chinese companies?
YELLEN: Well, it's not only Chinese companies. We would feel that any, particularly any financial institution that facilitated trade in dual use goods or strictly military goods in violation of our sanctions and aiding Russia's military, we would consider sanctioning. The president issued a recent executive order that would enable Treasury to impose sanctions on financial institutions that are found to be doing this in the systematic way. And we've not used this tool yet, but it is one that would be available and what I've tried to make clear is that we stand ready to act if we see significant violations by, especially by financial institutions—
EISEN: In China?
YELLEN: Well, in other countries as well.
EISEN: What about the Chinese government and its support of Russia?
YELLEN: Well, China is entitled to have a relationship with Russia. What we have made clear is it is unacceptable to us for China to support Russia militarily. And that's, doesn't say that China can't have a relationship with Russia. China and Russia do a lot of trade. Much of it isn't problematic. But anything that involves aiding Russia's military in their brutal war against Ukraine is unacceptable to us and we have the ability to sanction it.
EISEN: We've also seen increasingly close economic ties between China and Iran. And especially now with Iran increasing threats against Israel, I do wonder how concerned you are and American businesses should be about this.
YELLEN: Well, we have strong sanctions in place against Iran. And when we encounter ongoing valuations, we've had a number of sanctions, actions that have tried to address that. That's an area of great concern.
EISEN: But just in terms of China's relationship, China's relationship with Russia, with Iran. Is that a matter that U.S. businesses, who do a lot of business in China, should be concerned about?
YELLEN: To the extent that it creates a national security risk for us, it is something we stand ready to address.
EISEN: Should American companies be reducing their exposure to China on the manufacturing basis?
YELLEN: Look, I think trade and investment between China and the United States is valuable. Many American companies are doing excellent business in China, have been here for a long time. The same is true of Chinese companies in the United States. And this trade is beneficial. And the great majority of it is uncontroversial. And I think we should not do anything to impede that trading and investment relationship, but in the areas where we have national security concerns, as we've clearly demonstrated, we stand ready to act to protect our national security. That may mean export controls or other, other interventions. And we try to target those narrowly so that they don't have broad-based impact on China's economy as a whole. And we feel strongly and agreed with the Chinese that we need a level playing field. You know, when we interfere, when we have regulations that affect our trade and investment with China, if it's national security or other reasons, we go through an open and transparent rule-writing process. We put out proposed regulations. We accept comments. The Chinese have the opportunity to comment. We take the input and we write regulations. It's very clear what we are doing. In China's case, often the support we believe there's may be often a lot of support in ways that are not transparent. And that really is a meaningful difference. But we're not trying to stifle trade and investment broadly speaking. So, I would not want to advise American firms, don't do business in China.
EISEN: But if I'm Tim Cook of Apple and looking at the geopolitical relationship and the national security concerns, ultimately, won't that trump the economic relationship?
YELLEN: Well, the purpose of the dialogue that I've been involved with now for well over a year with our Chinese counterparts is intended to make sure that does not happen, that we don't have an unintended escalation of tensions, that we understand one another's red lines. We avoid misunderstandings and we preserve economic interactions that are beneficial to both sides. We manage our relationship. We need to manage it responsibly so that both sides can continue to benefit.
EISEN: You put a lot of work into this and you said in your news conference this afternoon that the relationship is in a better place than it was a year ago.
YELLEN: Definitely.
EISEN: Do you worry about the relationship in one year from now if President Trump gets reelected?
YELLEN: Look, I don't want to get into politics. I'm governed by the Hatch Act. I feel President Biden and President Xi directed myself and the Vice Premier He Lifeng to work toward a better, more stable, predictable relationship with one another to stabilize our relationship, to try to manage our differences, create better channels of communication. And importantly, work together on many things where we can both make contributions that are important to the globe, whether it's dealing with climate change or other issues, public health issues, debt issues of low-income countries. And that's what we're, that's what we're trying to do. We have greatly deepened our relationships. And I feel our relationship in this economic sphere is in a much better place.
EISEN: One thing that's helped the dynamic is the U.S. is coming with a strong hand right now on our economy.
YELLEN: I think we can feel great about our economy. There's—
EISEN: I was going to ask you what you made of this last jobs report.
YELLEN: Well, it just shows that U.S. is firing on all cylinders. I mean, in terms of short-term performance, inflation is coming down. The job market is very strong. The growth has really been a lot stronger than I would have expected at this -- at this stage. We had 3.1 percent growth last year. Inflation is coming down. Labor supply is up and we're seeing some of the pressures we might worry about coming from the labor market impacting inflation. They're subsiding, but unemployment remains very low.
EISEN: You're still confident we can get to 2 percent this year? We've seen a little bit of a flare up so far this year.
YELLEN: Well, I think it will continue to come down over time. That's my expectation. And, you know, I'm hopeful that we, we can certainly get into the twos.
EISEN: And recovery stays intact with or without Fed rate cuts?
YELLEN: So, I'm not going to make a forecast on Fed rate cuts. The Fed has indicated that they want to make sure that inflation is really coming down and that they are obviously considering rate cuts that would be appropriate when they reach that judgment. And we've had generally good news on inflation. You know, let's look at the data. I believe inflation will continue to come down.
EISEN: Yeah. And I guess I'm wondering if the economy continues to hold up no matter what happens on the Fed.
YELLEN: I think we've got a good, strong economy. We've good very domestic demand. Consumers are holding up, some low-income consumers are perhaps exhausting their buffers of savings that they built up during the pandemic. We're seeing a little bit more distress at the household level there. But, generally, households are in very good financial shape. Our financial system is generally quite strong. I don't -- things can always happen. There's always recession risk. Geopolitical developments could create risk to our economy. But I think we've got a good, strong economy that's on a solid track.