‘Chaotic’ Policy: Janet Yellen & Lina Khan on Tariffs 4/14/25

0:00Bring in show music, please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. What is really happening here? Do you guys feel like you know? To put it bluntly, I have no idea. Tariffs on, tariffs off. Uncertainty is the name of the game. Janet Yellen, former Treasury Secretary and former Fed Chair on what's at risk. This is really creating an environment in which households and businesses feel paralyzed by the uncertainty about what's going to happen. It makes planning almost impossible. And the economic damage that could be done. There's good reason to believe that we're going to see a surge in inflation.

0:43And the federal government versus Meta, the blockbuster antitrust trial for the trillion-dollar tech giant, kicks off today. Lena Kahn, former head of the FTC, helped build the case. What happened when Facebook became so much more? It resorted to this buy or bury scheme, where if it couldn't outcompete a rival, it either bought them out or would cut them off its network. Plus, laptop shopping with tariffs in mind. You're back to what? Back to the PC laptop. What do you call it? Dell. I think we have a Dell. And a Masters tournament for the ages. No, I wasn't crying. But it was very emotional. You know I cry at all this stuff.

1:20You do. I do. It's Monday, April 14th, 2025. Squawk Pod begins right now. Stand, Andrew, bye. In 3, 2, 1, cue Andrew. Good morning. Welcome back to Squawk Box right here on CNBC. On this Monday morning, we are live at the NASDAQ market site and Times Square. A lot going on. I'm Andrew Ross Sorkin, along with Joe Kernan and Kelly Evans, who's hanging out with us this week. Thank you for being here. That quick is off. Short week. It's a short week. It's a shortened week. We'll see. But we'll see how short it really feels when it's over. When you get up at 3.30 every day for four straight days. Four straight days.

1:58And given the news cycle, it doesn't seem to stop. There were a lot of lots of speculation over the weekend about whether we were going to open up higher or whether we would open up a lot lower, given the sort of gyrations in terms of what the president and this administration has been telling us about these tariffs on China. Let's give you a brief update because it feels like we have gone on a traveling time machine of sorts. So this is the update on where we are on computer chip tariffs. So he made comments, new comments, late last night trying to explain where we really are. We'll explain in just a moment where we were on Friday night.

2:37Take a look. Once those tariffs are in place, they're non-negotiable. Is that right? But the tariffs will be in place in the non-distant future because, as you know, like we did with steel, like we did with automobiles, like we did with aluminum, which are now fully on, we'll be doing that with semiconductors, with chips, and numerous other things. And that'll take place in the very near future. Okay, so now that message, though, came at the end of a weekend of a lot, a lot, a lot of confusion surrounding what was really going on with these tariffs. Because on Friday night, U.S. Customs published a list of 20 products categorized, including semiconductors and smartphones, that it said would be exempt.

3:20These were quote unquote exemptions from the White House's 125 percent tariff on China. And then all hell broke loose where everybody said, oh, my goodness, he's capitulating. He blinked. Oh, this is the art of the deal. This is brilliant, depending on what you thought. Tim Cook got his way. All of it. Then yesterday on a social media site, and this is after actually some of members of the administration went on television. President Trump said that he was, quote, unquote, clarifying what was going on and that there were no tariff exemption announced on Friday, despite the White House putting they use that word exemption, by the way.

3:57These exception exemption. These products are subject to the existing 20 percent fentanyl tariffs, he said, and they are just moving to a different now tariff bucket. That was also the message from top administration officials yesterday. And a lot of folks trying to understand what they were even saying at the time because of what we had read earlier. National Economic Council Director Kevin Hassett saying that phones and chips would be subject to tariffs on a national security basis. Then Commerce Secretary Howard Lutnick added that those tariffs would be coming in a month or two from now. We need to have chips and we need to have flat panels.

4:34We need to have these things made in America. We can't be reliant on Southeast Asia for all of the things that operate for us. So what he's doing is he's saying they're exempt from the reciprocal tariffs, but they're included in the semiconductor tariffs, which are coming in probably a month or two. But in China, Trump's move is being portrayed as a retreat. And I will tell you that Max Sorkin, my son, is now using the fact that the tariffs are back on as a reason that we need to go out and buy a laptop for him immediately before the prices go up. So we had a pause. I thought I was out of the laptop buying business.

5:15And then as of last night, we were back to needing the laptop. I'll buy him a laptop. My God, you're a... He already has a laptop. But I have a better one or a newer one. Get the newer one. You can definitely... You got six jobs and they're all high paying. Well, you know what I said to him? I said, why don't we just wait this out? And if it costs twice as much, it's on me, dude. So we can wait. We can wait. You're delaying the pain for you, for the output, the money going out. He's got high school coming up, and so I think he needs to have the most advanced laptop possible that I'd like to last for three or four years in high school.

5:53So you think it could be better? Now, the other thing. You know me. I'm always waiting for the next best product. Is that Mac or is that PC? We're an Apple family. We're an Apple family. for the most part. Most people are, I think. The stuff Lutnik was saying yesterday, then they pushed back on that. He said, oh, yeah, this is... But you can't take everything the Commerce Secretary says to the bank, necessarily. I think markets know that. Yeah, markets know that. And I would say... But I thought we're supposed to take what he just said to the bank this time. Lutnik? They're shrugging it off. Wasn't he the one who said, now this is going to be...

6:26Just wait, more is coming. You've got Apple up 5 % and everything's green today. But that's what I understand. If the 10-year had stayed where it went, I don't think we'd be up today. But, I mean, it was 4.6. But even at 4.44? No, 4.44. But if you look at a three-month chart, 4.44 was where we were before we got that back up the rate, or the fall rate, which we didn't really understand. The deficit is so bad. The growth is slowing. Can someone just explain this to me? Because I'm still, I have to say, I'm still confused. So we believe that the tariffs are just going to be at a 20 percent rate, and that's the rate it's going to be for the foreseeable and forever future.

7:05Is that a Fentanyl? Which one? You mean China? I'm back to China, and I'm back to chips. I think the only option for China would be... That's the Fentanyl 20 percent. That's the Fentanyl 20 percent. Everybody gets that. Right, no, everybody gets that, but that's not 125 percent. No, 158 percent. Everybody thought we were moving on. It's not a joke. They called it a joke. Well, which part are we? That's what I'm trying to understand. What is really happening here? What time? Do you guys feel like you know? To put it bluntly, I have no idea. What time? Six o 'clock. We may know more at seven o 'clock.

7:37Or we may know less. Or we may know something different. We may know more in the middle of it. We think they're down. The reason the market's moving the way it must be is that people think that we're down at 20 % again. I think they think it's a real exemption. I think there's someone convinced him that you don't want to cut our tech industry off at the knees in terms of AI. But can I just suggest to you, I'm not suggesting we should because you know that I'm not in the camp of favoring this approach. Having said that, if you are trying to bring manufacturing of important industries back to the U.S., once you decide that you are exempting chips and computers and all of that stuff, then what we're really talking about is bringing manufacturing of Nikes, you can see the memes online, back to the U.S., which is something I don't think he wants necessarily.

8:27So what are we really talking about here? I think he wants to bring it back, but I think he knows it'd be too disruptive to do it immediately. But the journal called the whole approach herky-jerky. I think that's what it is. It's a little bit herky-jerky, which causes a lot of hanky-panky in the markets. I mean, we can't go like this forever. It would be like watching that Masters final round for it, where you can't do that forever. It's just too much. It's just too much. It's too much. Yeah. By the way, relevant data point perhaps is that China's exports, we learned, just jumped a lot more than expected in March.

9:00Businesses front-loading shipments to avoid U.S. tariffs. Exports rose 12 % last month in U.S. dollar terms from a year ago. That was well above the Reuters estimate and the biggest jump since last October. In the first two months of the year, China's exports had slowed, but this is clearly showing there's a lot of front-loading going on. All the imbalance is getting worse before they're maybe going to get better. Apple is what all the Sorkins use. And we are, too. What is it? We're in the ecosystem. I went back to PC. Even on my Apple TV, you're back to what? Back to the PC laptop. What do you call it?

9:35Dell. I think we have a Dell. Had Dells for years. Apple Music. Apple. Apple. Apple. Apple is the one company that could be severely impacted by American tariffs on smartphones, obviously, and other technology. Over the weekend, Bloomberg reported Apple increased its production in India of iPhones almost 60 % in the last 12 months, ending in March versus the prior year. The report said Apple now makes one in five of its iPhones in India, and that suggests a continued shift away from Chinese production that began during the pandemic. We alluded to this, but golfer Rory McIlroy completing his Grand Slam by winning the Masters.

10:19He beat Englishman Justin Rose in a one-hole playoff at Augusta National, birdieing number 18. After Rose had parred the hole, he almost sunk an unbelievable putt in regulation and then had an even shorter one but just missed as it broke off to the right a little. McElroy had been leading earlier. Watched that lead evaporate on the back nine with some bogeys. and his fourth double bogey for the week, which is never, we've never seen a person win the Masters after four double bogeys. He's just the sixth player in golf history to win all four major championships. And with the win, he took home a$4.2 million prize for first place.

11:00He becomes, I think, the sixth person to win all four majors. Gary Player did it twice. And afterwards, I mean, the guy that we still have that, and God bless me, I think he's 85 or 86, Jack Nicklaus was on the Golf Channel, which Golf Channel got a lot of play. Everybody did. Anybody that covered it got a lot of play. What a tournament for everyone. But Jack said he really wanted, we think he had on his shoulders to win the grand, you know, to finally complete that. But since he was a little boy, he wanted to wear a green jacket since he was six years old. This is my favorite part of the whole thing.

11:33Some of it? No, no, no. About young Rory, all the clips. Yeah, curly hair. Oh, my gosh, he's chipping into a washing machine on a talk show in Northern Ireland at age six or seven or eight or nine. I mean, he's a true phenom. He is a phenom. I know you laugh a bit, but you saw the Nike commercial, right? With Tiger Woods? No. With the jacket and the dry cleaner. It goes around and around and has a thing, basically, like when it's supposed to be delivered, Sunday, McElroy. McElroy. It's pretty great. I had something in my eye. I was having trouble watching. That was my problem in a couple of times.

12:06I'm like you. Only golf can do that. Somebody else was crying. And that's, you know, no, they really weren't. I guess it was just me. Now that I think about it. No, I wasn't crying. But it was very emotional. You know I cry at all this stuff. You do. I do. I cry at everything. Rory broke down when he sunk that putt. And they were, I mean, he did it. But what he put all of us, I had him before the tournament started. I bet on him a lot of money for me,$25. So I won$180. But Justin Rose, too. I mean, that guy. I said early on after, you know, after what happened to him on, I mean, he was, he led for two straight rounds Thursday and Friday, shot, I think, 75 on Saturday.

12:47But what a performance on Sunday. That guy is ice in his veins. Great guy. Nice guy. I think he's 44 years. Got great on sides now. But you cannot take anything away from Justin. I don't think he feels bad now because he lost fair and square on that playoff hole. Yeah. I mean, the previous, I think Rory had the identical yardage in regulation on 18, hit the same club. I think he hit a gap wedge. And then he was in the same place. The first time he put in a bunker and didn't get up and down. Second time, three and a half footer. Amazing. His little poppy was there. Yes. Amazing. Golf can do great things, Andrew.

13:25It really can. That was something. That might have been the greatest masters, one of the greatest masters. And for some reason, Augusta, it always brings out the greatest. I was thinking, you know, you go through all the rigmarole to get there, and you probably thought to yourself, wow, I picked the right one. You didn't see the end? There was Rory, Rory was talking, except Brian Roberts literally was about a foot and a half away. Like, I saw Brian, I go, there's the big boss. Sister Network. Yeah. Congrats to all of them. Cheese will be next. Coming up next on Squawk Pod, more on tariffs, treasuries and President Trump with former Treasury Secretary and former Fed Chair Janet Yellen.

14:09To me, President Trump is taking a sledgehammer. Not only that he's pounding our allies with this, but he's pounding the U.S. economy with this sledgehammer. She does not hold back in this extended interview. We'll be right back.

14:30This is Squawk Pod. Stand by Joe. Here's Mike. Q. You're watching Squawk Box. I'm also going to do that in. We can't do that. I'm Jill Kernan along with Andrew Ross Sorkin and Kelly Evans. Monday, Tuesday, Wednesday, Thursday. 3.30, 3.30, 3.30, 3.30. Four. You get up at four? I do. Why do I get up at three? But that's why you're you. A lot of things take time for me. She called President Trump's tariffs the worst self-inflicted wound. Former Treasury Secretary as well as former Fed Chair Janet Yellen is with us this morning. And we're thrilled to have her as we all try to make sense of what is going on around us.

15:09Secretary Yellen, thank you for joining us. Help us understand what you know or you think of, for example, some of the comments that were made both on Friday and then over the weekend as we try to make sense of which tariffs are on and which tariffs are on or off, rather. Do you know? Well, I think it's just completely chaotic. I know a lot of relief was felt when we discovered on Friday night or Saturday that computers and phones, electronics would be exempt from the highest Chinese tariffs. But then we were told yesterday that that's just a temporary reprieve and that there will be further developments there.

16:00So really, things have been just chaotic. The reciprocal tariffs put on, then paused, don't know what's going to happen next. This is really creating an environment in which households and businesses feel paralyzed by the uncertainty about what's going to happen. It makes planning almost impossible. Have you gotten calls from any of your former counterparts that are either allies or enemies or others trying to understand what's going on? And I'm curious if you have what you tell them. Well, I have had a few meetings, and the truth is I honestly don't know what to tell them because these are huge.

16:48I've said self-inflicted wound. And to me, President Trump is taking his sledgehammer, not only that he's pounding our allies with this, but he's pounding the U.S. economy with his sledgehammer. And I don't understand the rationale for the tariffs. Most economists would say if you're—if what you're trying to do is to reduce the trade deficit, imposing tariffs is not going to be successful and is not the way to go about doing that. The best approach there would be greater fiscal discipline, which we're not likely to see. And perhaps it's to bring back American manufacturing. But I really think that's a that's a pipe dream and not something that is likely to be accomplished.

17:45And we could even raise questions about whether or not in a broad based way that's a desirable goal. And it's really hard to predict where this is going. The escalation with China could have very significant global implications. Fair to say that the Biden administration did implement tariffs on China itself. So we should get back to that in just a moment. But I'm curious if you'd put your Fed hat back on or at least your former Fed hat back on. And tell us what you saw in terms of the bond market last week and what you think of the bond market as a proxy for what's going on. How concerned are you about that to the extent there are risks in the system?

18:29How do you see that playing out? Well, we saw a very unusual pattern over the last couple of weeks in financial market developments. Normally, when times are chaotic and uncertainty is high, there's a desire to invest in safe assets, and that tends to push down U.S. Treasury yields. But U.S. Treasury yields went up. And when U.S. Treasury yields go up, normally that attracts capital inflows that would boost the dollar. But both the dollar declined, and U.S. Treasury yields rose. And what that suggests is that investors are beginning to shun dollar-based assets and that calling into question the safety of what is the bedrock of the global financial system, namely U.S.

19:31Treasuries. Now, I was pleased that the 10 - and 30-year auctions went well. I don't think we're seeing dysfunction in the sense of liquidity completely drying up in the markets. But a pattern suggestive of a loss of confidence in U.S. economic policy and the safety of bedrock financial assets is really very worrisome. Secretary Yellen again, it's great to have you here. It's Kelly. I just have a question on that exact point. You were under some criticism for relying more on Treasury bills during your tenure, as we had some issues then with the amount of financing that had to be done. We are on equal, if not worse, footing now.

20:20And there are some rumors in the market that the Treasury Secretary, who came in and doubled down on your strategy, might actually have to further increase bill issuance. Do you think that that would be a sensible thing to do right now if it means the difference between kind of exploding long end yields and costs to move even more in that direction and on short term bill issuance? What do you think the impact of that would be? Well, you know, the U.S. Treasury has, for a very long period of time, followed a strategy when it comes to issuance of longer-term Treasury securities of regular, predictable, orderly issuance.

21:02We don't try to play the markets, look at what's happening with yields along the curve, but announce a medium-term program of bond sales that the market understands. So I don't think that moving to bill issuance because you're disturbed that long rates have gone up would be a sensible financing strategy. Bill issuance did surge after the debt ceiling was resolved, and it really spiked. The reason for that is that the Treasury normally holds a cash balance of anywhere between five or eight hundred to eight hundred billion dollars. And as the debt ceiling came, became more and more binding, that cash balance was run down to something very close to zero and had to be quickly rebuilt.

22:08And short-term treasuries and bills serve as a buffer. And so that's where the issuance initially was. But over time, the regular orderly and predictable issuance pattern would be bringing that down. So there was really no plan to massively increase bill issuance. And I don't think that would be wise. Do you believe that either the Chinese could start dumping U.S. treasures or just not buy them? And or there was some speculation last week it was actually the Japanese that were doing that. I mean, in terms of just a rational approach to this, there is an argument to say that if the Chinese were to do such a thing, they would be hurting themselves.

22:55That would be my assessment, is that China, if they were to sell dollars, would be pushing up the value of their own currency and creating risks to the Treasury market and to global financial stability that would harm them and would represent a very significant escalation. So it's not something that I would expect China to do. I'm sure China hopes that we will be able to negotiate a bargain on both sides, reduce these extraordinary tariffs. In terms of the quote unquote art of the deal, who do you think has more leverage right now? There seems to be two arguments. One is that the United States is still the biggest economy in the world, the most important economy in the world that everybody needs and wants to do business with the U.S.

23:57And therefore, we have leverage over our allies and others. There's another perspective that over these next 90 days that China may try to create its own alliances with the EU and other countries, effectively to ask things effectively of us or at least make it harder for them to have for us to have leverage over them. Well, I think the policies that the Trump administration are following, both with respect to unilateral imposition of tariffs and also our alliances, commitment to NATO, treatment of Ukraine, are really causing our allies to have severe doubts about the United States as a friend and reliable ally and promises we've made, including through USMCA to Canada and Mexico that the previous Trump administration negotiated.

25:05We are simply burning those agreements without consultation. So I really am worried about the United States being becoming isolated, viewed as untrustworthy, and this creating an opportunity for China to work with some of our best allies, Japan, South Korea, others, to try to. And, you know, that is that is a very substantial economic region. Have you discussed any of this with Scott Besson? No, I have not. I know there was a dinner that took place last week among a whole host of former treasurer secretaries. I don't believe you were there, but I was curious if you I know you had spoken to him early on when he first got the job.

25:56I didn't know if you had had conversations with others inside the administration. If you haven't spoken to him, I was going to ask you whether you've talked to Jay Powell because he's the other person. that may have to make some decisions about how to treat all this. And I'm curious if you put your Fed hat back on, sort of how you think the Fed should even think about this, which is to say, you know, there's a question mark about whether the Trump administration has a put or a floor on this market, whether they can take the tariffs away or what they can do. But on the other end, you know, if the Fed effectively tries to prop up the system, they effectively, therefore, are supporting these policies.

26:31And it's unclear whether, well, it's not even unclear. Jay Powell clearly doesn't like these policies. Well, look, there's no put when it comes to the stock market ever with respect to the Fed. Although if risk to financial stability arise, and let me be clear, I do not yet see those in play and hope they don't come into play. The Fed has a range of liquidity facilities that I would expect them to deploy as they did in March of 2020 after the pandemic. You know, I think that the tariff policies and the uncertainty they're creating create the most difficult possible situation for the Fed, because the Fed is going to focus squarely on its two congressionally mandated objectives, price stability and maximum employment.

27:34And inflation's come down. It's not quite at the Fed's target. But there's good reason to believe that we're going to see a surge in inflation, at least for a while. And we've seen in surveys. I was just going to say, last time it obviously was not transitory. It was deep-seated. It was maybe, I don't know, money supply, however you want to look at it, fiscal spending. that was the definition of not transitory when you called it transitory. This time, since it would be, you know, if it only, if the tariffs, if there wasn't a trade war, it's a one-time increase, so you don't, the second derivative isn't affected where inflation rises every year, not just one-time price.

28:24It just seems like this would be the definition of transitory, especially with oil prices coming down below$60. I mean, this is a time to use the transitory word, not the last time. Well, a lot of what happened the last time was also one shot. But the transitory suggests a matter of weeks and months. And it clearly wasn't that. And this time it may be longer as well. The really key question has to do with inflation expectations and whether or not there can be second round effects when prices go up. And I think they will go up very noticeably. Just think about autos. There's going to be sticker shock in auto showrooms quite soon, I believe.