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(Bloomberg) — In former President Donald Trump’s view, a strong dollar is walloping US manufacturers. For Treasury Secretary Janet Yellen, it’s just not that simple.

Yellen, who consistently hews to the longstanding Group of Seven commitment to market-set exchange rates, said in an interview last week that a muscular US dollar needs to be considered in a broader context when assessing its impact. She also played down the role of international trade in undermining American factory jobs.

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“A very strong dollar can discourage exports and contribute to imports,” Yellen said in an interview with Bloomberg News. “But there’s a lot more that’s involved. And I think you have to ask, why is the dollar strong?”

Coming off a series of meetings with global finance chiefs in Rio de Janeiro, Yellen reflected in the interview Friday on what’s become a hot topic in the run-up to the November presidential election, as Republicans rail against a strong dollar.

The Treasury chief said that legislation enacted by President Joe Biden — dubbed Bidenomics — to bolster infrastructure, semiconductors and clean energy and, through the Inflation Reduction Act, electric vehicles, has offered countervailing support for manufacturing. 

“We have a very strong economy. Consumer spending and investment spending are robust. The programs that we’ve put in place — the IRA, infrastructure and then the rest of it — all of that is creating a lot of manufacturing jobs,” she said.

US economic strength has, in turn, pulled in foreign capital and elevated the dollar’s value, Yellen said last week. Moves by the Federal Reserve to tamp down inflation have left interest rates higher than in other countries, also contributing upward pressure. “We believe that’s how the system should work,” she said in a Thursday press conference.

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Trump, by contrast, told Bloomberg Businessweek in an interview that “we have a big currency problem” and that “nobody wants to buy our product because it’s too expensive.”

The 2024 Republican presidential nominee also has revived his claims that some of America’s biggest trading partners have conspired to keep their currencies cheap against the dollar, giving them an unfair advantage. His running mate, Ohio Senator JD Vance, has suggested weakening the US currency would give American manufacturers a shot in the arm.

US industrial output, three-quarters of which is manufacturing, last month climbed to the highest level since 2018, capping a quarter in which the US posted an unexpected pickup in economic growth. Business investment increased at the fastest pace in almost a year, led by the strongest advance in equipment since the start of 2022.

Yellen said that while US factory jobs have steadily dropped over the decades, manufacturing as a share of GDP has held relatively steady. The employment losses have been more due to productivity gains than to trade, she said.

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China Threat

At the same time, the Treasury chief has repeatedly expressed concerns about the threat to US manufacturing from large-scale subsidies from China’s government to its producers. In the interview, she suggested disappointment with the Chinese leadership’s twice-a-decade economic policy planning confab held earlier this month — where Beijing made clear it will continue to prioritize high-tech manufacturing, even if it means facing international fire.

“I didn’t see anything about addressing structural imbalances, boosting consumer spending,” Yellen said. “Nothing that I saw about boosting spending on services, and very much continued to stress high-tech advanced manufacturing.”

Speaking a week before the July US employment report, Yellen said that the overall labor market looks good.

“I would describe it as a strong, solid labor market, not overheated, operating in the vicinity of the natural rate,” she said, referring to the level above which employment spurs inflation. 

With the Fed slowly bringing inflation closer to its 2% target, Yellen said she believes the risks to inflation and employment have now come into balance.

—With assistance from Viktoria Dendrinou.

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