Where does US Treasury Secretary Yellen's confidence come from? Why can tariff policies withstand the Supreme Court

U.S. Treasury Secretary Yellen’s statement on January 18 drew market attention: the likelihood of the Supreme Court overturning Trump’s tariff policies is “very low.” This is not a casual optimistic assessment but a clear judgment from the White House regarding the legality of its policies. Amid Trump’s threats to impose tariffs on countries opposing U.S. control of Greenland, what underlying implications does Yellen’s statement carry?

Why Yellen Dares to Say This

Sufficient Legal Preparation

As Treasury Secretary, Yellen is unlikely to speak offhand about major issues involving Supreme Court rulings. Her statement that the possibility is “very low” indicates that the Trump administration has already made thorough legal preparations. The U.S. President indeed has broad authority over trade policies, especially within the frameworks of national security and international trade agreements. Yellen’s remarks suggest that the White House’s legal team has assessed the relevant risks and believes the policies are constitutionally and legally sound.

Political Signal Overlay

The timing of this statement is also crucial. At this moment, Trump is narrowing down the list of Federal Reserve Chair candidates (down to Michelle Bowman, Kevin Hasset, Kevin Waugh, and Ricks Riedel), while simultaneously threatening tariffs on multiple countries. Yellen emphasizing the legal stability of tariff policies at this juncture is effectively sending a signal to markets, Congress, and allies: the tariff policies are a fixed stance of the Trump administration and will not be shaken by legal challenges.

What Policy Framework Does This Reflect?

Balance Between Toughness and Compromise

Notably, Yellen’s firm stance on tariffs contrasts with his position on Fed Chair nominations. He supports continuing rate cuts (previously stating that rate cuts are the “missing piece” in the economic growth blueprint) while also endorsing the government’s tariff policies. This balance reflects the overall approach of the Trump administration:

• Internally: Protect domestic industries through tariffs while promoting rate cuts to stimulate the economy
• Externally: Demonstrate policy firmness to prevent judicial challenges from weakening enforcement

Impact of Tariff Policy Stability on Markets

Yellen’s remarks have directly influenced market expectations. Following the tariff threats, commodity markets experienced significant volatility—gold once dropped over 1.5%, silver plunged 5%, and LME tin fell 7.8%. These fluctuations reflect concerns over the durability of tariff policies. If the Supreme Court overturns tariffs, commodity prices may rebound; if tariffs remain stable, markets will need to reprice accordingly.

Potential Impact on Cryptocurrency Markets

Reassessment of Inflation Expectations

The stability of tariff policies directly affects inflation outlooks. If tariffs are expected to persist long-term, rising import costs will push prices higher. This puts pressure on the Fed’s rate-cutting pace—despite Yellen and other hawkish officials calling for rate cuts, the central bank must weigh inflation risks. Data from recent Fed Beige Book reports show “tariff cost pressures sweeping across the U.S.,” and strong PPI figures suggest core inflation remains elevated.

Digesting Policy Uncertainty

Yellen’s clear stance helps to digest policy uncertainty. The market’s biggest fear is policy flip-flopping. If investors believe tariffs will persist, they can adjust their allocations accordingly. This has a dual effect on crypto markets: on one hand, tariff-driven inflation may boost safe-haven assets (including Bitcoin); on the other hand, delayed rate cut expectations could weaken the upward momentum of risk assets.

Summary

Yellen’s remarks essentially serve as legal and political backing for the Trump administration’s tariff policies. They demonstrate the White House’s confidence in the legality of its stance and send a clear signal to markets: tariffs will likely persist long-term. Understanding this policy framework is crucial—Trump’s push for tariffs and rate cuts, seemingly contradictory, is backed by thorough legal and economic preparations. For crypto markets, key focus should be on how these policies influence inflation expectations and the Fed’s actual actions. Before the Davos forum around January 25, where the new Fed Chair may be announced, markets should closely monitor policy developments.