Free Trade

Why Does Janet Yellen Suddenly Sound Like Trump on Trade?

In comments to The New York Times Magazine published this week, the new treasury secretary says free trade has been "so negative" for "a large share of the population." That's just wrong.


In June 2018, just a few months after she'd been replaced as chair of the Federal Reserve, Janet Yellen issued a stark warning about the populist tendencies emanating from the White House.

"We're seeing a huge retreat from the principles the U.S. has espoused and all the institutions that we built in the postwar period. Resisting protectionism and strongly supporting a rules-based multi-lateral system are what the US stood for and promoted as a global system with great success," reads the transcript of Yellen's remarks from an event hosted by Credit Suisse, an investment bank based in Switzerland. She went on to say that there are "legitimate" trade issues with China that should be addressed, but argued that turning away from the global economic system was "a very worrisome development."

"I believe that system is responsible for great improvements in growth and well-being around the globe," Yellen said.

None of that was unusual for Yellen, who once served as a top economic advisor to the Clinton White House and last month became the first woman confirmed to the post of treasury secretary. Indeed, as recently as last year, during an event at the World Bank, she beamed that "the growth of trade that we have seen over the last 50 years in the development of global supply chains has been one of the most important factors boosting growth all around the world."

It's pretty obvious that Janet Yellen is no protectionist. That's exactly why a more recent comment from Yellen, included as part of a long profile of several top Biden economic advisers and officials published this week by The New York Times Magazine, almost jumps off the page when you read it.

"The trend toward globalization has resulted in losses for workers, and the time has come to really remedy that—the impact has been simply so negative on such a large share of the population," she told the Times' Noam Scheiber.

It's the sort of quote—especially the dramatic and unquantifiable inflation: so negative for such a large share of the population—you might expect from a populist politician with little interest in economic reality, like former President Donald Trump or Sen. Bernie Sanders (I–Vt.). Coming from the measured, academic mind of Yellen, it seems wildly out of character.

The best explanation, of course, is that Yellen is just trying to be a team player here. The Biden administration has signaled that it is unwilling to make a sharp break with Trump's trade policies, likely because the White House sees domestic political benefits of talking about protectionism. Biden's first major trade policy moves were the announcement of a "Buy American" plan for federal procurement that will force taxpayers to pay higher prices for goods the government buys, and the reimposition of tariffs on aluminum imported from the United Arab Emirates. Neither of those things should be expected to do much to boost American manufacturing, but both will marginally increase costs and complicate some of those global supply chains that Yellen knows are key to ongoing economic growth.

But even if she's merely going along to get along, Yellen's sudden transformation from a defender of globalization to a cheerleader for protectionism is, as she might have once described it, "a very worrisome development." That her boss, the president, has undergone an apparently similar change of heart—Biden once championed the North American Free Trade Agreement (NAFTA) and served as the Obama administration's top advocate for the doomed Trans-Pacific Partnership (TPP)—is also not great.

Protectionism is so hot right now, but that doesn't mean it's the right course. Yellen, of course, knows this. The idea that a global system of trade has been "so negative" for such a "large share of the population" is simply not borne out by the data. Probably the most direct way to disprove this claim is to look at the average hourly earnings of American workers over the past 70 years.

To put it simply, this is not what you'd expect to see if a "large share of the population" was suffering.

When you strip away the exaggerated rhetoric, what the protectionists that have taken over both major parties are really concerned about is the decline in manufacturing jobs in America. The number of Americans employed in manufacturing has fallen from 17 million to about 12 million in the past 20 years—this is hardly a national crisis that requires overturning the entire global economic system. There are certainly some people for whom that decline has been painful, but Yellen (and Biden and everyone else who is serious about federal policy making) should understand the difference between data and anecdotes.

Furthermore, the decline of manufacturing as a share of the whole American economy has been more or less on a steady downward march since the end of World War II. This isn't a crisis created by the rise of China or the creation of the World Trade Organization (WTO) in 1995. It's a function of macroeconomic elements far beyond the poor power of any presidential administration to control or reverse.

Fewer workers are employed in manufacturing, but the average worker is earning far more per hour. This is a problem? Meanwhile, American manufacturing output is significantly higher today than it was when the WTO was established. In fact, even at the lowest point of last year's COVID-19 recession, manufacturing output was still higher than it had been in any year before 1997.

Investment in American manufacturing—from both domestic and foreign sources—has grown steadily in the past two decades, as Scott Lincicome, senior fellow in economic studies at the Cato Institute, pointed out in a report published last month.

"If you look at what actually happened from 1994 to now, which encompasses the creation of NAFTA and the WTO and China joining the WTO, real median weekly earnings for U.S. workers increased by nearly 20 percent while we added about 30 million new jobs," says Bryan Riley, director of the free trade initiative at the National Taxpayers Union Foundation, a free market think tank. "So, obviously, the vast majority of U.S. workers are much better off now than they would be if we turned back the clock to 1993 or earlier, and a lot of that progress is due to international trade and investment."

But these data points probably miss the biggest benefit that American workers have gained from globalization: access to goods they otherwise wouldn't have been able to afford—everything from smartphones to pandemic-ending vaccines are the product of global supply chains.

In short, there is no crisis of American manufacturing. And there is certainly no evidence that the globalization of manufacturing jobs has been "so negative" for a "large" share of American workers. Where there are economic issues created by the displacement of jobs, there might be an argument (though probably not a very convincing one) for government aid to those who have been harmed. That's a far cry from the positions that both major political parties are increasingly taking.

Or, as Yellen herself put it just a few years ago, global trade "is responsible for great improvements in growth and well-being around the globe."

If the new administration is going to fulfill its promise to return America to something resembling normalcy, Biden and Yellen should not let the misguided protectionists control this debate.

NEXT: Biden Is Still Separating Families at the Border. Where Is the Media Outrage?

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  1. Oh, so we’re keeping the sanctions on the brutal authoritarian regime that’s currently engaged in genocide, quashing democracy and human rights in Hong Kong, and threatening war on 80% of South East Asia?

    1. Oh, I forgot to add that it also interfered with our elections. That’s really bad, last I heard.

      1. Did they buy any Facebook ads? I wanna how how serious their election meddling was.

        1. You must mean, “Did they take a meeting with the President’s son, son in law, personal attorney, and campaign manager? Did that campaign manager share sensitive data on US voters with those spies? And then did they coordinate the release of stolen property through Roger Stone?”

          Because that all did happen, factually, unarguably, as shown in the Senate intel report on the matter, vol 2.

          1. Why are you on about Biden and China now? We’ve all been told there’s nothing to see there.

          2. Hahahahahahahahahahahahabahahhahaa

          3. More than that. China basically purchased the Bidens.

            1. I assume you have some nearly 2000 pages of evidence, including sworn testimonies, convictions, and intercepted communications for your claim, as I do?

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        2. It’s Facebook. They didn’t have to buy anything.

    2. It’s almost like, if you could look past Trump, there were actual reasons not to play nice with a genocidal socialist dictatorship; whether Trump knew or understood those reasons or not.

      1. I think most Americans are on board with “fuck china” policies.

        Applying tariffs rather haphazardly resulted in some bad outcomes, like farmers taking in 40% of their revenue as government hand outs in 2019 while farm exports fell by more than $10B, and small independent importers being put out of business while larger businesses were able to find ways around the tariffs.

        Trump’s tariffing of our closest allies also diminished the China focus and brought about a bunch of retaliatory tariffs from all around the globe, further hurting US exports, especially farmers.

        1. Retaliating against our retaliation against the pre existing retaliatory tariffs? Guess we should just beg and grovel for what every other country on earth decides we should be allowed to have, right Jeffy? It’s not like we’re the biggest economy on earth or anything.

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          2. Tell me more about how starting a trade war with Canada was a genius 4d chess move.

      2. The USA – not China – is the Greatest Source of harm to Americans. When I try to boycott the USA, they send men with guns to my house

    3. Threatening? They already attacked india

  2. It’s like watching the slow kid in the class finally beginning to figure things out.

    1. Lol. Good description of about half the articles here over the past month.

  3. Slowly he realized they weren’t on his side after all.

  4. BTW, who did Eric vote for?

  5. jesus this shit is hilarious keep pumping these come to jesus moments out. Why come democrats just like trump in all the issues we care about?

    1. At least he didn’t use the description “trumpian” to describe normal Democrat actions like Sullum does.

  6. It’s disappointing to think that Yellen is only now saying things she doesn’t really believe when she so reliably used to only say things she really did believe. It’s like when you find out that Nigerian prince isn’t really a prince after he’s been so honest with you about his troubles getting his fortune out of Nigeria.

  7. Dear Eric,
    Trade good; tariffs bad. Of course and well said.
    Yellen’s a free trade turncoat? You’re gonna pull a muscle. Don’t do that.

    1. Open theft is also bad. So is market manipulation. Eric lives in a world where China isn’t committing both bad actions.

  8. As I’ve often explained, it’s a good idea to look past what Democrats say, and pay more attention to how they actually govern. Even if Biden Administration officials sound like Drumpf at times, they won’t continue his disastrous anti-billionaire program.

    Need proof? Consider the fortune of’s benefactor Charles Koch. Mr. Koch lost over $5 billion in 2020 because of Drumpf’s high-tariff / low-immigration policies. But with Biden in the White House, he’s already up over $2.5 billion this year. That’s because Biden knows he can feed his middle- and lower-class voters empty promises, while pursuing an agenda that benefits the billionaires and Wall Street tycoons who carried him to victory.


  9. Again, why is anyone surprised?
    Biden didn’t campaign against Trump on trade, he echoed Trump on trade in his campaign ads.

    1. Reason was too enraged at Trump to actually pay any attention to what Biden said he was going to do, and now we get daily articles about how shocked they are at his policies.

  10. “She’s a traitor! A racist! A Trumpster! Part of the ‘cult’ “, the lefty; wait the lefty is a Reason magazine writer? Oh yep; Boehm stated he’d vote for Biden.

    Janet just as well switch parties and might even work at eliminating ‘foreign’ subsidies for importers… Dare to dream? Speaking of actual *free* trade Boehm how about an article on whatever happened to the Trump commission assigned to end the shipping subsidies on imported goods?

  11. What an odd column.

    The left wing of the Democratic party have been against NAFTA, GATT and most “free trade” policies for years. The left doesn’t want free trade — they champion for “fair trade” — they don’t want companies to be able to easily open up shop in under-developed countries and pay them a pittance while leaving the American worker out of a job.

    The criticism from the left on Trump’s trade policies wasn’t that he embraced protectionism, but that he did it in a bull in a china shop way, the protectionism he didn’t impose didn’t actually accomplish anything and he made bullshit national security claims.

    Most of Trump’s critics against his tarriffs were from corporate/centrists/conservative folks who worried that the cost of goods was going to go up and profit margins would suffer.

    Maybe the real question you should be asking is why the Trump sounded like the left on trade??

    I know Reason loves fair trade and will do anything to prop it up no matter how much the American worker has to suffer so long as corporations can keep making higher and higher profit margins while paying their workers as close to zero as possible…but let’s not pretend that somehow this is some big gotcha.

    Biden isn’t a liberal, Yellen isnt a liberal. But they are now embracing liberal positions and walking away from the destructive DLC/Clintonite/New Democrat way of thinking about economics.
    Why?? Most likely to please the Democratic base.
    Why exactly is this surprising?

    1. Biden is an empty vessel ready to be filled with whatever the highest bidder chooses to fill him with.

      1. Cool Story, Bro!

  12. ” … since 1994 …real median weekly earnings for U.S. workers increased by nearly 20 percent…”

    Bullshite. I worked in tech in 1991, 3 years out of university, making about $52,000 a year. Nice houses in the 2 cities I lived in that year cost $86,000 and $280,000 respectively.

    This year, my son, recently out of university in the same field, will make $103,000. The exact same nice houses in those same 2 cities now cost $600,000 and $3,000,000 respectively.

    Salaries in top tier jobs have doubled, but housing costs have risen 6-10 fold. The bottom of the economic ladder has had it much, much worse.

    One of the never-discussed aspects of globalization is that the money spent on offshore-made goods has boomeranged back to drive up housing costs to the point where they are completely disconnected from local wages. That is unequivocally disastrous for everybody starting out without familial wealth.

  13. “Why Does Janet Yellen Suddenly Sound Like Trump on Trade?”

    Septuagenarian, East Coast, Democrats have a great deal in common, even if one lies about being a Republican and says disingenuously nasty things for the cameras about his recent cronies and donation recipients.

    “New president, old errors.”

    “Economic Nationalism 2.0”

  14. Why Does Janet Yellen Suddenly Sound Like Trump on Trade? Because Trump is an idiot, too.

  15. Free trade is not free. It’s heavily subsidized by the United States Navy.

  16. Perhaps this is because the Democrats are appealing to the same voters Trump did, who do see it that free trade hurt them? Whether that is an accurate assessment is less important politically than whether they firmly believe it and will vote that way.

    Biden is well known for being a windsock politically, having no firm principles but occupying the Democratic Party’s center, wherever the Overton Window moves it to.

  17. Oh, fun with misleading charts, the good old days are really back.

    Nonfarm business sector wages over time is one way to look at it. There are many others, including excluding upper management and such to try to look at the situation for an average worker. Most such estimates of real wages over time shows a peak in the 1970s. All of them show a divergence from productivity, with the gains being excluded from workers and going to the top earners.

    It’s questionable to even compare buying power across many decades considering the different states of population, technology, and geopolitics.

    That said, I’m in favor of a borderless world, because borders are fictions and so are the cultures contained in them. I think you’re right that Yellen is not trying to defend globalism while both parties’ activists are fixated on it. At some point we’re going to have to figure out how to feed everyone while robots do all the work. Only someone operating from a (false) pseudo-Calvinist perspective would find that to be a crisis rather than an opportunity, of course.

  18. Off topic/Hot Tip:

    Biden is threatening Nigeria with sanctions if they don’t change their (unenforced) anti-homosexuality laws.

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