WASHINGTON — Treasury Secretary Janet L. Yellen said on Thursday that global supply chains had proved to be unstable amid the pandemic and Russia’s war in Ukraine and called for a reshaping of trade relationships oriented around “trusted partners,” even if it meant higher costs for businesses and consumers.
Ms. Yellen spoke at a news conference during the spring meetings of the World Bank and International Monetary Fund, where policymakers around the world have been discussing how to revive economic growth and combat inflation while keeping pressure on Russia. The Treasury secretary said that protectionism, or taxing imports more, was not the answer, but that the economic benefits of the world’s network of supply chains were not worth the risk of a reliance on adversaries.
“Our supply chains are not secure, and they’re not resilient,” Ms. Yellen said at the Treasury Department. “And I think that’s something, in terms of long-term risk to the U.S. and to other countries, that’s a threat that needs to be addressed.”
Ms. Yellen added that trusted trading blocs would need to be big enough to avoid amplifying inflation while ensuring that supply chains were secure.
“I don’t think it would mean permanently higher inflation, but just a somewhat higher level of cost, a somewhat less efficient system but one that is more resilient,” she said.
Global policymakers at the meetings this week have been grappling with how to address supply chain disruptions that have led food prices to surge around the world. Officials will release in the coming weeks proposals to bolster food supplies, ensure that small farmers can afford fertilizer and improve social safety nets in places with food insecurity.
“There’s a very real risk soaring global market prices for food and fertilizer will result in more people going hungry, further exacerbate inflation and harmful fiscal and external positions,” Ms. Yellen said.
Economic forecasts this week underscored the significant headwinds that the war in Ukraine and sanctions on Russia were inflicting on the global economy. The Biden administration made clear this week that it intended to ramp up pressure on Russia, rolling out new sanctions and announcing on Thursday $1.3 billion in military and economic aid to Ukraine.
At the news conference, Ms. Yellen said rebuilding Ukraine would be costly and suggested that Russia should have to bear some of that expense.
“It’s clear that the rebuilding costs, ultimately, in Ukraine are going be enormous,” Ms. Yellen said. “And certainly looking to Russia one way or another to help provide some of what’s necessary for Ukraine to build is something I think we ought to be pursuing.”
