Former Treasury Secretary Janet Yellen said economic uncertainty around President Trump's whiplash tariff policies has prompted a "really very worrisome" trend for dollar-based assets.
"We saw a very unusual pattern over the last couple of weeks in financial market developments," Yellen said during a Monday morning appearance on CNBC's "Squawk Box." "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."
"The safety of bedrock financial assets is really very worrisome," she added.
Treasurys sold off sharply last week amid fears of weaker foreign demand for U.S. debt.
Yellen was on the Federal Reserve board for nearly a decade and chaired the body from 2014 to February 2018 during the Obama administration before later leading the Treasury Department under then-President Biden.
She said current markets would suggest investors are timid about U.S. Treasurys.
"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," she said. "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."
"What that suggests is that investors are beginning to shun dollar-based assets and calling into question the safety of what is the bedrock of the global financial system, namely U.S. Treasurys," she added.
Trump's oscillating tariff policies — supercharged by the April 3 unveiling of his long-promised tariffs on most imports from other countries — have sent markets on a rollercoaster in recent weeks as most countries scramble to hammer out trade deals with the U.S. while China digs in with its own escalating tariffs and other tactics. Trump has put a 90-day pause on his proposed "reciprocal" tariffs, except for those on Chinese imports, while leaving in place a new 10 percent baseline tariff.
"Things have been just chaotic," Yellen said in the CNBC interview. "The reciprocal tariffs put on and paused ... 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."
Yellen previously voiced her dire take on the broader impact on the economy during a separate interview Friday on CNN.
"This is the worst self-inflicted policy wound I’ve ever seen in my career inflicted on our economy," she said. "The Trump tariff plans are doing immense damage to our economy."