US Might Need to Produce More of Its Own Goods, Yellen Says

Treasury Secretary Janet Yellen
Yellen also conceded that the continued low supply of labor was “a mystery” amid the high demand for workers. (Greg Nash/The Hill via Bloomberg News)

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Treasury Secretary Janet Yellen said that U.S. reliance on foreign supply chains has proved a vulnerability and that the country needs to produce more critical goods domestically to protect its economic and national security.

“It’s possible that policies that people will describe as protectionist are going to be necessary in order to create the appropriate incentives to produce things at home,” Yellen said in an interview recorded Dec. 6 for an online conference hosted by the Financial Times.

“Certainly we want to work with other countries — with our allies and partners — to address supply chain resilience on a collective basis,” the treasury chief also said in remarks aired Dec. 7. “So, I don’t think this is just about the United States making everything at home, but in some cases that may be part of the answer.”

Disruptions caused by the COVID-19 pandemic have limited the supply of many goods, including those of semiconductors found in a range of products from electronics to automobiles, leading to frustration for manufacturers and higher prices for consumers. Yellen said it may take “a couple of years” to resolve the bottlenecks for many products.

President Joe Biden ordered a review of such vulnerabilities earlier this year that is focused on semiconductors, batteries, critical minerals and pharmaceuticals. Yellen said the review is moving to a second phase that will examine supplies necessary for defense, food, public health and communications technologies.

The treasury chief also repeated her views that elevated inflation mainly was caused by pandemic-related supply issues and that it would fade as the virus came under control. She said she saw no evidence of a wage-price spiral that could sustain the pace of price increases for an extended period.

While the economy and the jobs market remained strong, she conceded that the continued low supply of labor was “a mystery” amid the high demand for workers.

“I’m not sure I know the answer,” Yellen said, adding that over time a tight labor market and improving health conditions are likely to bring some workers back.

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