U.S. Treasury Secretary Janet Yellen warned on Sunday that former President Donald Trump's proposal to replace federal income taxes with high tariffs would have severe economic repercussions, making life unaffordable for many Americans.
In an interview on ABC's "This Week," Yellen explained that the tariffs necessary to replace income tax revenue would exceed 100%.
"The impact would be to make life unaffordable for working class Americans and would harm American businesses," she said in response to host Jonathan Karl's question about Trump's plan.
Trump recently suggested the idea of eliminating federal income taxes and imposing substantial tariffs on imports during private meetings with GOP lawmakers on Capitol Hill. This move would lead to significantly higher prices on imported goods, as the cost of the tariffs would be passed on to consumers.
Economic experts from both political spectrums have questioned the tariff policy proposal, with significant concerns about its potential impact on American consumers.
An analysis by the Center for American Progress (CAP), a left-leaning Washington think tank, estimates that the proposal would cost Americans approximately $1,500 per year.
Tariffs are currently a small source of U.S. revenues, accounting for 1.7 percent of annual federal income in fiscal 2024.
Yellen also defended the Biden administration's handling of the economy, particularly regarding inflation.
Although inflation has slowed, Americans are still experiencing high price levels. "It is true that over the last roughly three years there has been a significant increase in the price level. It is now rising at a very slow, close to normal rate," Yellen said. "But yes Americans see that and mainly it comes on top of concern about costs that were making life very difficult. So it's something the Biden administration absolutely wants to address."
When asked why polls indicate that Americans trust Trump more than Biden on economic issues, Yellen attributed it to the lingering effects of the pandemic.
"The pandemic was a profoundly difficult time," she said, adding that Americans are still grappling with increased costs in areas like healthcare, energy, education, and childcare.
"In the years leading up to the pandemic, many working-class families were already struggling with these expenses, and the post-pandemic inflation has compounded their difficulties," Yellen added.
She said that alleviating these costs is a top priority for the Biden administration.
