April 14, 2025 • 20 mins
Treasury Secretary Scott Bessent sought to calm investors’ various concerns on topics including tariff policy, the recent selloff in Treasuries and questions over Fed independence. Bessent spoke to Bloomberg's Annmarie Hordern.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I'm pleased to be with Treasury Secretary Scott Bessett this time.
You're back on Bloomberg in Argentina. Thanks for joining us again.
Speaker 1 (00:14):
Good good to be with you, Good to be in
Buenos Aires.
Speaker 2 (00:16):
Yeah, it's fantastic here. So you've come here at a
time when the IMF has just announced this twenty billion
dollar agreement with Argentina. But we haven't seen a Treasury
secretary come to Argentina since Trump's first administration, and that
was for G twenty. So why the emphasis from the
Trump administration on Argentina.
Speaker 3 (00:35):
Well, and Marie, a couple of reasons. The reason for
being here today is today's a Fulcrum day. So the
Melee administration has done three adjustments and this marks the
beginning of the third one. So they did a large
fiscal adjustment, a large monetary adjustment, and they're doing or
(00:56):
they announced on Friday, or large currency adjustment has allocated
twenty billion to them. The World Bank has allocated twelve billion.
And I wanted to come here today to show support
for President Melee and his commitment.
Speaker 1 (01:15):
Two.
Speaker 3 (01:17):
What I think is historic in terms of bringing Argentina
back from the precipice.
Speaker 2 (01:22):
When it comes to the trade negotiations, I'm sure you
spoke with President Milay about the ten percent rate that
Argentina was hit with. Do you think at some point
that can come down to zero?
Speaker 3 (01:33):
Look, I think we're going to start the negotiations and
just like with everyone else, I'm telling them, bring your
a game, we'll see what you got and we'll go
from there.
Speaker 2 (01:41):
Can any country go to zero again?
Speaker 1 (01:45):
We'll see.
Speaker 3 (01:46):
Is I don't know what's going to happen with the
negotiations because we've got a whole box of things. We've
got to overcome tariff, non tariff trade barriers, currency manipulation,
and sub subsidization of labor and facilities. So there's a
(02:07):
big menu there.
Speaker 2 (02:08):
There's been an early focus on Latin America writ large
from the Trump administration in the first one hundred days.
Is Latin America policy also in a sense China policy
for this administration.
Speaker 3 (02:19):
Well, I think that might be a good description because
what we are trying to keep from happening is what
has happened on the African content where China has signed
a number of these rapacious deals marked as AID, where
they are really they've taken mineral rights. They've added huge
(02:41):
amounts of debts onto these countries' balance sheets. It's undisclosed
to any of the other international organizations. They've got tolling arrangements,
so they're guaranteeing that future generations are going to be
the poor and without resources, and we don't want that
to happen any more than already has a Latin America.
Speaker 2 (03:03):
China has a foreign exchange swap with Argentina. Would you
consider a credit line directly from the United States.
Speaker 3 (03:09):
That's not under consideration in terms of so they have
an eighteen billion dollar credit swap in r and b
Argentina under the previous peronas government drew down five billion,
and that will remain outstanding. The Chinese showed very good
faith effort after the announcement or in conjunction with the
(03:33):
IMF announcement, so that is going to be rolled forward
for a year.
Speaker 2 (03:37):
But do you want them to get rid of that
swap with Beijing?
Speaker 3 (03:40):
Well, I think as this administration continues stay the course
of their economic policies, they should eventually have enough foreign
exchange inflows to be able to pay that off.
Speaker 2 (03:54):
So less than two weeks ago, you and I were
talking outside of the White House after what President called
Liberation Day, and you said you weren't part of the negotiations.
Now you're leading them. What's changed in these past twelve days.
Speaker 1 (04:08):
No, no, no, no.
Speaker 3 (04:09):
What I said was I didn't construct the actual rate,
the teriff rates. I've always been part of the tariff policy.
I had been focusing on tax maybe I want to
talk about that later. That's going very well, and now
with the trade negotiations, I'm going to be part of that.
(04:31):
And the President has hit a ninety day pause button,
and we are moving quickly with many of our most
important trading partners. So we had Vietnam in last week,
we have Japanese in on Wednesday, South Korea next week,
so it's.
Speaker 1 (04:52):
Going to move fast.
Speaker 3 (04:53):
But the important thing for your viewers to know is
we're sending up a process and we are going to
run that process. It's going to be orderly and at
the end of the day, especially for the most important
trading partners, the President's going to be involved.
Speaker 2 (05:07):
So when it comes to the current negotiations this week,
you're also sitting down again with the Spanish negotiating team.
This excuse me, the Japanese negotiating team and also the
Spanish economy minister.
Speaker 3 (05:18):
Well, the Spanish economics minister was just a pre arranged meeting.
He and I have never met, so that is not
a trade sit down. The Japanese meeting is a trade negotiation.
Speaker 2 (05:32):
The Japanese Prime Minister recently said he's not going to
rush to get a compromise in a negotiation. How quickly
do you think you can see these deals come to fruition?
Speaker 3 (05:40):
Well, again, I think there will be advantage to our allies,
especially in a first mover advantage. You usually the first
person that makes the deal gets the best deal.
Speaker 1 (05:53):
So if you think will be first, it's their choice.
Speaker 2 (05:57):
Is there a handful of countries that you expect to
have a deal before the ninety days is up.
Speaker 3 (06:02):
Oh, I think there could be numerous countries, and it
may not be the actual trade document, but we will
have an agreement in principle and be able to move
forward from there.
Speaker 2 (06:15):
So we're talking about a dozen or seventy plus.
Speaker 1 (06:19):
I think it's going to depend.
Speaker 3 (06:21):
But we're going to move with all deliberate speed, and
again it's going to be a process. It's going to
be USTR, who just has mountains of data that they've
been collecting over the years. Because, in a funny way,
the terriffs are the easiest part. So a country with
high tariffs you can just say, okay, this this, get
(06:44):
rid of it. It's the non tariff trade barriers that
are more insidious, more difficult spot and it's probably going
to take a little longer to exercise those demons.
Speaker 2 (06:55):
When you said you weren't part of the rates in
that chart that the President held in the Rose Garden,
is he taking a maximist approach? Neil Dutterer recently wrote
that President Donald Trump has cracked a lot of eggs,
and now Scott Bessett's treasure secretary needs to make an omelet.
Is that how you view this situation right now?
Speaker 3 (07:12):
I view not giving away negotiating secrets on worldwide television
as the essence of negotiating.
Speaker 2 (07:19):
You recently talked about getting deals done quickly with partners
to then confront China together. When you're in these negotiations
with trading partners, are you looking for them to offer
up something to combat Beijing?
Speaker 3 (07:31):
Well, I think combats an aggressive word. But look, I
think now that we have had the China terriffs in place,
that they are going to want to have some protection
from Chinese goods flooding their markets. That China's business model
is like from that Disney movie where the brooms are
(07:51):
carrying the buckets, like they're not going to stop manufacturing
because the US.
Speaker 1 (07:57):
Has a terriff wall up. So those goods are going
to go somewhere.
Speaker 2 (08:00):
Where do you think they're going to dump?
Speaker 1 (08:01):
Well, I think it depends on the good.
Speaker 2 (08:05):
We have exemptions now though for electronics, so we still
expect electronics to come into the United States with the
smaller tariff rate, the fetanyl twenty percent.
Speaker 1 (08:14):
But you were asking where are they going to dump?
Speaker 3 (08:16):
I think it will depend on what is the good,
higher value added manufacturing goods, likely the Europe, Canada in
the G seven and then kind of more the bobbles
and knickknacks in the Global South.
Speaker 2 (08:31):
China's Commerce ministry came out when the tarff rates were
going above one hundred percent and called it, quote a joke.
Has there been negotiations on any level between Beijing and
Washington right now?
Speaker 3 (08:43):
Well, look it'll come from the top. President Trump, Chairman
Shee have a very good relationship and I wouldn't say
that these are not a joke.
Speaker 1 (08:54):
I mean, these are big numbers.
Speaker 3 (08:56):
I think no one thinks they're sustainable, wants them to
remain here.
Speaker 1 (09:00):
But it's far from a joke.
Speaker 2 (09:03):
Well they just say that the rate is so high
it's become a joke. Basically. Does it just stop trade
between Washington and Beijing altogether? Do you see a decoupling
of these two economies?
Speaker 3 (09:13):
Well, maybe the trade minister has a different sense of humor.
I do, but I don't see anything funny about it.
Speaker 2 (09:19):
Do you see a decoupling though, between Washington and Beijing?
Speaker 1 (09:22):
There doesn't have to be. There could be.
Speaker 3 (09:25):
There's a big deal to be done at some point.
But look what is different with China that is different
in the history of trade that normally, if you go
back to the big trade deals or the currency deals
in the eighties Applausa Acord, Louver Accord, the Reagan Auto deals,
(09:49):
our leading economic competitors were our military allies. China is
both our biggest economic competitor and our biggest military rival.
So that's going to require a special kind of formula.
Speaker 2 (10:04):
Are you teasing out a Mara Alago accord that we
should be paying attention for in the future.
Speaker 1 (10:08):
I'm not sure what you're talking about.
Speaker 2 (10:10):
Oh, potentially getting all these trading partners together to discuss
fair balance trade.
Speaker 1 (10:15):
Well, we're doing that over the next ninety days.
Speaker 2 (10:18):
Okay. So shifts in tariff policies has had markets on edge.
Even the President recently remarked the bond market was quote queasy.
Do you have a sense of who is dumping US assets?
Who's been dumping US treasuries.
Speaker 1 (10:32):
I don't think there's a dumping.
Speaker 3 (10:33):
And I think we saw in the TIC data either
today or Friday that actually foreign ownerships picked up.
Speaker 1 (10:41):
We had two, we had three big.
Speaker 3 (10:43):
Auctions last week, and on the longer end auction ten year,
thirty year, we saw increase foreign competition. So I actually
think this is one of those occasional varshocks that you
get in the trading community. I think a lot of
people got very leverage, maybe out over their skis, and
then you combine that with some real money selling and
(11:07):
you get these moves.
Speaker 2 (11:08):
So you don't think it's sovereigns. Potentially it's hedge funds unwinding.
Speaker 1 (11:13):
I have no evidence that it's sovereigns.
Speaker 3 (11:16):
And look emery not you, but The nature of journalism
is to create a headline that ten days ago when
tenure yields hit three ninety said, well, Secretary Besson got
what he wanted, he got ten year yields down.
Speaker 1 (11:33):
But it's the wrong reason.
Speaker 3 (11:35):
Now, I forget what they hit on Friday, maybe for
forty something.
Speaker 1 (11:39):
We saw a.
Speaker 2 (11:39):
Fifty basis move last week and ten year yield at
the same time the dollar was weakening nearly three percent.
How do you simultaneously look at that situation. It feels
like investors are dumping US assets.
Speaker 3 (11:53):
Well, look, I've learned that not to look at what
happens the over a week. I, for better or worse,
have lived through a lot of these things in trading.
In one's personal trading history is the scar tissue that
sticks with you the most. I can tell you exactly
where I was standing in nineteen ninety eight when the
(12:16):
long term capital the bacle happened. That had nothing to
do with anything other than a bunch of geniuses up
in Greenwich who had too much leverage.
Speaker 2 (12:24):
So you're not concerned at this moment about the US
dollar or the US Treasury losing safe haven asset. No,
we're still a.
Speaker 3 (12:32):
Global reserve card, we are still a global reserve currency
that we have a strong dollar policy.
Speaker 1 (12:39):
The dollar can go up and down to go and look.
Speaker 3 (12:42):
Back at President Trump's first term, I don't remember the
exact number, but the dollar in twenty seventeen went down,
I can't remember seven eight nine percent, and then once
the tax bill was done, took off, took off the
remainder of his term.
Speaker 2 (13:02):
Have you spoken to the Fed at all about contingency
plans though? If financial stability risks flare up.
Speaker 3 (13:08):
Chair Powell and I have breakfast every week and we
discuss a wide range of things, and you know, our
staffs are always in contact. We have a market's room,
they have a market's room. But specifically, did we discuss
some kind of a break the glass? I think we're
(13:28):
a long way from that.
Speaker 2 (13:29):
So when was the last time you guys spoke? We
had breakfast last week?
Speaker 3 (13:32):
We had breakfast last week and it wasn't away game.
Speaker 1 (13:36):
I was over at the Fed and.
Speaker 2 (13:38):
No concern so far from the Fed chair and what
he saw on the treasury market.
Speaker 1 (13:42):
I think we would have heard from the Fed chair.
Speaker 3 (13:45):
I think we heard from Governor Collins of Boston on Friday.
We heard from Governor Weller today on his thoughts on
what terrists mean so seems like businesses.
Speaker 2 (14:00):
When it comes to the FED chair, his term is
up May twenty twenty six, so we're almost twelve months
out from that. When are you going to start to
think about have these discussions with the president about who
should lead the FED?
Speaker 1 (14:11):
Well, we think about it all the time.
Speaker 3 (14:12):
I think, when are we going to start the interviewing candidates?
Speaker 1 (14:17):
And that'll be some time in the fall.
Speaker 2 (14:19):
In the fall, so about six months lead time. The
US Supreme Court recently came out with the ruling that
the executive branch, the president for now could oust top
officials at independent agencies, and that has some individuals in
the market a little bit concerned about what this could
mean for the independence of the FED, which is really
a cherished pillar of wanting to invest in America. Do
you have any concern about potentially President Trump ousting FED
(14:42):
Chair J Powell or the independence of the Fed?
Speaker 1 (14:44):
Well and Marie, I've.
Speaker 3 (14:47):
Repeatedly said that the FED has two duties, and I
believe that monetary policy is a jewel box that's got
to be preserved, and then they have regulatory policies, and
I think we can have more of a discussion because
the FED is one among three bank regulators, and there's
(15:07):
the FED Controller of the currency and the FDICE. So
I think it's very easy to delineate between those two.
Speaker 2 (15:17):
So at the moment, no concern, no concern. When you
talk to FED Chair j Palet, at the moment, doesn't
sound like they feel like they need to step in
on this unraveling we saw last week with the bond market.
Does the Treasury have any plans to do something if
this was to become more unnerving?
Speaker 3 (15:33):
Well, look, the Treasury has lots of things we can do,
but again I think we're a long way.
Speaker 2 (15:41):
From that, but all options would be on the table.
Speaker 3 (15:44):
Sure, But again we have a big toolkit that we
can roll out. We do regular off the run buybacks.
We could up the buybacks if we wanted.
Speaker 2 (15:57):
So just finally, I want to get your thoughts on
something you told me John and lisaon February, which was
that in your old world, you would be that person
with your ear against the door trying to understand what
policy makers were doing, so then you could predict where
financial markets would go in this moment where we hear
from top executives constantly. Today it was the Goldman Sachs CEO.
(16:20):
Last week it was JB. Diamond, And there uncertainty, especially
around tariff policy. What advice would you be giving to
your old self.
Speaker 3 (16:30):
To look at the whole policy, because again, not you,
but others in the media can pick one factor. So
right now it's tariff tariff, tariff, But have you mentioned
we have tax tax tax coming up, We have deregulation
to regulation to regulation, so it's a mini the leg stool,
(16:53):
and I would try to think about what's happening. The
tariff sequencing was always going to be first, the tax
bills going very well, and I think I've been pleasantly
surprised at how quickly that's moving along. And then deregulation
from our area on the financial side and in the
rest of the economy that takes a little longer, but
(17:14):
that will start kicking in September, October in the fall,
and those are going to be very powerful.
Speaker 2 (17:20):
I believe you described as a three leg tool, and
right now everyone is focused on one part of that leg,
and that's the tariffs. As you say, when it comes
to the tax cuts, right now, what the market is
expecting and what could get done in Congress based on
how slim the majority is for the Republicans is just
an extension of current policy.
Speaker 1 (17:39):
I think that's wrong.
Speaker 3 (17:40):
I think that the underreported story in the media, the
story this funder report doesn't get reported enough, is a
democratic chaos, but that the underreported story is the remarkable
Republican unity led by President Trump. Speaker Johnson first try
got it instructs out of the House for the budget.
(18:02):
He passed a clean CR first try. Senator or Leader
Thoone pinged it back to the House very quickly with
their instructions. And I had something along with Kevin Hassett
had in a c chair called the Big Six, which
also includes Leader Throone, Speaker Johnson, Senator Crapo, Committee Chair
(18:26):
Jason Smith. And everyone's very aligned. And there's going to
be a lot more bells and whistles other than in
tc other than just changing the date on TCJA.
Speaker 2 (18:42):
So your pitch right now to financial market participants to
consumers is you need to see the entire picture.
Speaker 3 (18:50):
Well, you need to see the entire picture. And as
President Trump said the other day, stay cool. It was
my message when I was out with you. You on April. Second,
it was to the countries. These are maximum rates, So
you ask if it was a Maximus strategy. If you
don't elevate, this is your maximum rate. So don't elevate.
Speaker 1 (19:13):
You have in.
Speaker 3 (19:15):
Markets the upside barrier, you don't have unlimited risk, and
then come to us and we will negotiate.
Speaker 1 (19:23):
In good faith.
Speaker 2 (19:23):
Can you guarantee clarity in ninety days.
Speaker 3 (19:28):
I think clarity is through the eye of the beholder.
But I can guarantee you that we're going to run
a robust process, and I think the market can take
great comfort in that.
Speaker 2 (19:40):
So maybe some of that uncertainty starting to evaporate.
Speaker 3 (19:42):
Yeah, if we measure uncertainty by the VIS I think
that the VIX. I don't want to make market calls,
but I think that the VIC spiked and is likely peaked.
Speaker 2 (19:54):
Secretary Bessant, we really appreciate your time. Of course, that
was Scott Bessant, the US Treasury Secretary here in Buenos Aires,
and his pitch to the world. It's a three legged stool.
In terms of Trump administration's policy proposals. Right now, the
market squarely focused on tariffs,
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I'm pleased to be with Treasury Secretary Scott Bessett this time.
You're back on Bloomberg in Argentina. Thanks for joining us again.
Speaker 1 (00:14):
Good good to be with you, Good to be in
Buenos Aires.
Speaker 2 (00:16):
Yeah, it's fantastic here. So you've come here at a
time when the IMF has just announced this twenty billion
dollar agreement with Argentina. But we haven't seen a Treasury
secretary come to Argentina since Trump's first administration, and that
was for G twenty. So why the emphasis from the
Trump administration on Argentina.
Speaker 3 (00:35):
Well, and Marie, a couple of reasons. The reason for
being here today is today's a Fulcrum day. So the
Melee administration has done three adjustments and this marks the
beginning of the third one. So they did a large
fiscal adjustment, a large monetary adjustment, and they're doing or
(00:56):
they announced on Friday, or large currency adjustment has allocated
twenty billion to them. The World Bank has allocated twelve billion.
And I wanted to come here today to show support
for President Melee and his commitment.
Speaker 1 (01:15):
Two.
Speaker 3 (01:17):
What I think is historic in terms of bringing Argentina
back from the precipice.
Speaker 2 (01:22):
When it comes to the trade negotiations, I'm sure you
spoke with President Milay about the ten percent rate that
Argentina was hit with. Do you think at some point
that can come down to zero?
Speaker 3 (01:33):
Look, I think we're going to start the negotiations and
just like with everyone else, I'm telling them, bring your
a game, we'll see what you got and we'll go
from there.
Speaker 2 (01:41):
Can any country go to zero again?
Speaker 1 (01:45):
We'll see.
Speaker 3 (01:46):
Is I don't know what's going to happen with the
negotiations because we've got a whole box of things. We've
got to overcome tariff, non tariff trade barriers, currency manipulation,
and sub subsidization of labor and facilities. So there's a
(02:07):
big menu there.
Speaker 2 (02:08):
There's been an early focus on Latin America writ large
from the Trump administration in the first one hundred days.
Is Latin America policy also in a sense China policy
for this administration.
Speaker 3 (02:19):
Well, I think that might be a good description because
what we are trying to keep from happening is what
has happened on the African content where China has signed
a number of these rapacious deals marked as AID, where
they are really they've taken mineral rights. They've added huge
(02:41):
amounts of debts onto these countries' balance sheets. It's undisclosed
to any of the other international organizations. They've got tolling arrangements,
so they're guaranteeing that future generations are going to be
the poor and without resources, and we don't want that
to happen any more than already has a Latin America.
Speaker 2 (03:03):
China has a foreign exchange swap with Argentina. Would you
consider a credit line directly from the United States.
Speaker 3 (03:09):
That's not under consideration in terms of so they have
an eighteen billion dollar credit swap in r and b
Argentina under the previous peronas government drew down five billion,
and that will remain outstanding. The Chinese showed very good
faith effort after the announcement or in conjunction with the
(03:33):
IMF announcement, so that is going to be rolled forward
for a year.
Speaker 2 (03:37):
But do you want them to get rid of that
swap with Beijing?
Speaker 3 (03:40):
Well, I think as this administration continues stay the course
of their economic policies, they should eventually have enough foreign
exchange inflows to be able to pay that off.
Speaker 2 (03:54):
So less than two weeks ago, you and I were
talking outside of the White House after what President called
Liberation Day, and you said you weren't part of the negotiations.
Now you're leading them. What's changed in these past twelve days.
Speaker 1 (04:08):
No, no, no, no.
Speaker 3 (04:09):
What I said was I didn't construct the actual rate,
the teriff rates. I've always been part of the tariff policy.
I had been focusing on tax maybe I want to
talk about that later. That's going very well, and now
with the trade negotiations, I'm going to be part of that.
(04:31):
And the President has hit a ninety day pause button,
and we are moving quickly with many of our most
important trading partners. So we had Vietnam in last week,
we have Japanese in on Wednesday, South Korea next week,
so it's.
Speaker 1 (04:52):
Going to move fast.
Speaker 3 (04:53):
But the important thing for your viewers to know is
we're sending up a process and we are going to
run that process. It's going to be orderly and at
the end of the day, especially for the most important
trading partners, the President's going to be involved.
Speaker 2 (05:07):
So when it comes to the current negotiations this week,
you're also sitting down again with the Spanish negotiating team.
This excuse me, the Japanese negotiating team and also the
Spanish economy minister.
Speaker 3 (05:18):
Well, the Spanish economics minister was just a pre arranged meeting.
He and I have never met, so that is not
a trade sit down. The Japanese meeting is a trade negotiation.
Speaker 2 (05:32):
The Japanese Prime Minister recently said he's not going to
rush to get a compromise in a negotiation. How quickly
do you think you can see these deals come to fruition?
Speaker 3 (05:40):
Well, again, I think there will be advantage to our allies,
especially in a first mover advantage. You usually the first
person that makes the deal gets the best deal.
Speaker 1 (05:53):
So if you think will be first, it's their choice.
Speaker 2 (05:57):
Is there a handful of countries that you expect to
have a deal before the ninety days is up.
Speaker 3 (06:02):
Oh, I think there could be numerous countries, and it
may not be the actual trade document, but we will
have an agreement in principle and be able to move
forward from there.
Speaker 2 (06:15):
So we're talking about a dozen or seventy plus.
Speaker 1 (06:19):
I think it's going to depend.
Speaker 3 (06:21):
But we're going to move with all deliberate speed, and
again it's going to be a process. It's going to
be USTR, who just has mountains of data that they've
been collecting over the years. Because, in a funny way,
the terriffs are the easiest part. So a country with
high tariffs you can just say, okay, this this, get
(06:44):
rid of it. It's the non tariff trade barriers that
are more insidious, more difficult spot and it's probably going
to take a little longer to exercise those demons.
Speaker 2 (06:55):
When you said you weren't part of the rates in
that chart that the President held in the Rose Garden,
is he taking a maximist approach? Neil Dutterer recently wrote
that President Donald Trump has cracked a lot of eggs,
and now Scott Bessett's treasure secretary needs to make an omelet.
Is that how you view this situation right now?
Speaker 3 (07:12):
I view not giving away negotiating secrets on worldwide television
as the essence of negotiating.
Speaker 2 (07:19):
You recently talked about getting deals done quickly with partners
to then confront China together. When you're in these negotiations
with trading partners, are you looking for them to offer
up something to combat Beijing?
Speaker 3 (07:31):
Well, I think combats an aggressive word. But look, I
think now that we have had the China terriffs in place,
that they are going to want to have some protection
from Chinese goods flooding their markets. That China's business model
is like from that Disney movie where the brooms are
(07:51):
carrying the buckets, like they're not going to stop manufacturing
because the US.
Speaker 1 (07:57):
Has a terriff wall up. So those goods are going
to go somewhere.
Speaker 2 (08:00):
Where do you think they're going to dump?
Speaker 1 (08:01):
Well, I think it depends on the good.
Speaker 2 (08:05):
We have exemptions now though for electronics, so we still
expect electronics to come into the United States with the
smaller tariff rate, the fetanyl twenty percent.
Speaker 1 (08:14):
But you were asking where are they going to dump?
Speaker 3 (08:16):
I think it will depend on what is the good,
higher value added manufacturing goods, likely the Europe, Canada in
the G seven and then kind of more the bobbles
and knickknacks in the Global South.
Speaker 2 (08:31):
China's Commerce ministry came out when the tarff rates were
going above one hundred percent and called it, quote a joke.
Has there been negotiations on any level between Beijing and
Washington right now?
Speaker 3 (08:43):
Well, look it'll come from the top. President Trump, Chairman
Shee have a very good relationship and I wouldn't say
that these are not a joke.
Speaker 1 (08:54):
I mean, these are big numbers.
Speaker 3 (08:56):
I think no one thinks they're sustainable, wants them to
remain here.
Speaker 1 (09:00):
But it's far from a joke.
Speaker 2 (09:03):
Well they just say that the rate is so high
it's become a joke. Basically. Does it just stop trade
between Washington and Beijing altogether? Do you see a decoupling
of these two economies?
Speaker 3 (09:13):
Well, maybe the trade minister has a different sense of humor.
I do, but I don't see anything funny about it.
Speaker 2 (09:19):
Do you see a decoupling though, between Washington and Beijing?
Speaker 1 (09:22):
There doesn't have to be. There could be.
Speaker 3 (09:25):
There's a big deal to be done at some point.
But look what is different with China that is different
in the history of trade that normally, if you go
back to the big trade deals or the currency deals
in the eighties Applausa Acord, Louver Accord, the Reagan Auto deals,
(09:49):
our leading economic competitors were our military allies. China is
both our biggest economic competitor and our biggest military rival.
So that's going to require a special kind of formula.
Speaker 2 (10:04):
Are you teasing out a Mara Alago accord that we
should be paying attention for in the future.
Speaker 1 (10:08):
I'm not sure what you're talking about.
Speaker 2 (10:10):
Oh, potentially getting all these trading partners together to discuss
fair balance trade.
Speaker 1 (10:15):
Well, we're doing that over the next ninety days.
Speaker 2 (10:18):
Okay. So shifts in tariff policies has had markets on edge.
Even the President recently remarked the bond market was quote queasy.
Do you have a sense of who is dumping US assets?
Who's been dumping US treasuries.
Speaker 1 (10:32):
I don't think there's a dumping.
Speaker 3 (10:33):
And I think we saw in the TIC data either
today or Friday that actually foreign ownerships picked up.
Speaker 1 (10:41):
We had two, we had three big.
Speaker 3 (10:43):
Auctions last week, and on the longer end auction ten year,
thirty year, we saw increase foreign competition. So I actually
think this is one of those occasional varshocks that you
get in the trading community. I think a lot of
people got very leverage, maybe out over their skis, and
then you combine that with some real money selling and
(11:07):
you get these moves.
Speaker 2 (11:08):
So you don't think it's sovereigns. Potentially it's hedge funds unwinding.
Speaker 1 (11:13):
I have no evidence that it's sovereigns.
Speaker 3 (11:16):
And look emery not you, but The nature of journalism
is to create a headline that ten days ago when
tenure yields hit three ninety said, well, Secretary Besson got
what he wanted, he got ten year yields down.
Speaker 1 (11:33):
But it's the wrong reason.
Speaker 3 (11:35):
Now, I forget what they hit on Friday, maybe for
forty something.
Speaker 1 (11:39):
We saw a.
Speaker 2 (11:39):
Fifty basis move last week and ten year yield at
the same time the dollar was weakening nearly three percent.
How do you simultaneously look at that situation. It feels
like investors are dumping US assets.
Speaker 3 (11:53):
Well, look, I've learned that not to look at what
happens the over a week. I, for better or worse,
have lived through a lot of these things in trading.
In one's personal trading history is the scar tissue that
sticks with you the most. I can tell you exactly
where I was standing in nineteen ninety eight when the
(12:16):
long term capital the bacle happened. That had nothing to
do with anything other than a bunch of geniuses up
in Greenwich who had too much leverage.
Speaker 2 (12:24):
So you're not concerned at this moment about the US
dollar or the US Treasury losing safe haven asset. No,
we're still a.
Speaker 3 (12:32):
Global reserve card, we are still a global reserve currency
that we have a strong dollar policy.
Speaker 1 (12:39):
The dollar can go up and down to go and look.
Speaker 3 (12:42):
Back at President Trump's first term, I don't remember the
exact number, but the dollar in twenty seventeen went down,
I can't remember seven eight nine percent, and then once
the tax bill was done, took off, took off the
remainder of his term.
Speaker 2 (13:02):
Have you spoken to the Fed at all about contingency
plans though? If financial stability risks flare up.
Speaker 3 (13:08):
Chair Powell and I have breakfast every week and we
discuss a wide range of things, and you know, our
staffs are always in contact. We have a market's room,
they have a market's room. But specifically, did we discuss
some kind of a break the glass? I think we're
(13:28):
a long way from that.
Speaker 2 (13:29):
So when was the last time you guys spoke? We
had breakfast last week?
Speaker 3 (13:32):
We had breakfast last week and it wasn't away game.
Speaker 1 (13:36):
I was over at the Fed and.
Speaker 2 (13:38):
No concern so far from the Fed chair and what
he saw on the treasury market.
Speaker 1 (13:42):
I think we would have heard from the Fed chair.
Speaker 3 (13:45):
I think we heard from Governor Collins of Boston on Friday.
We heard from Governor Weller today on his thoughts on
what terrists mean so seems like businesses.
Speaker 2 (14:00):
When it comes to the FED chair, his term is
up May twenty twenty six, so we're almost twelve months
out from that. When are you going to start to
think about have these discussions with the president about who
should lead the FED?
Speaker 1 (14:11):
Well, we think about it all the time.
Speaker 3 (14:12):
I think, when are we going to start the interviewing candidates?
Speaker 1 (14:17):
And that'll be some time in the fall.
Speaker 2 (14:19):
In the fall, so about six months lead time. The
US Supreme Court recently came out with the ruling that
the executive branch, the president for now could oust top
officials at independent agencies, and that has some individuals in
the market a little bit concerned about what this could
mean for the independence of the FED, which is really
a cherished pillar of wanting to invest in America. Do
you have any concern about potentially President Trump ousting FED
(14:42):
Chair J Powell or the independence of the Fed?
Speaker 1 (14:44):
Well and Marie, I've.
Speaker 3 (14:47):
Repeatedly said that the FED has two duties, and I
believe that monetary policy is a jewel box that's got
to be preserved, and then they have regulatory policies, and
I think we can have more of a discussion because
the FED is one among three bank regulators, and there's
(15:07):
the FED Controller of the currency and the FDICE. So
I think it's very easy to delineate between those two.
Speaker 2 (15:17):
So at the moment, no concern, no concern. When you
talk to FED Chair j Palet, at the moment, doesn't
sound like they feel like they need to step in
on this unraveling we saw last week with the bond market.
Does the Treasury have any plans to do something if
this was to become more unnerving?
Speaker 3 (15:33):
Well, look, the Treasury has lots of things we can do,
but again I think we're a long way.
Speaker 2 (15:41):
From that, but all options would be on the table.
Speaker 3 (15:44):
Sure, But again we have a big toolkit that we
can roll out. We do regular off the run buybacks.
We could up the buybacks if we wanted.
Speaker 2 (15:57):
So just finally, I want to get your thoughts on
something you told me John and lisaon February, which was
that in your old world, you would be that person
with your ear against the door trying to understand what
policy makers were doing, so then you could predict where
financial markets would go in this moment where we hear
from top executives constantly. Today it was the Goldman Sachs CEO.
(16:20):
Last week it was JB. Diamond, And there uncertainty, especially
around tariff policy. What advice would you be giving to
your old self.
Speaker 3 (16:30):
To look at the whole policy, because again, not you,
but others in the media can pick one factor. So
right now it's tariff tariff, tariff, But have you mentioned
we have tax tax tax coming up, We have deregulation
to regulation to regulation, so it's a mini the leg stool,
(16:53):
and I would try to think about what's happening. The
tariff sequencing was always going to be first, the tax
bills going very well, and I think I've been pleasantly
surprised at how quickly that's moving along. And then deregulation
from our area on the financial side and in the
rest of the economy that takes a little longer, but
(17:14):
that will start kicking in September, October in the fall,
and those are going to be very powerful.
Speaker 2 (17:20):
I believe you described as a three leg tool, and
right now everyone is focused on one part of that leg,
and that's the tariffs. As you say, when it comes
to the tax cuts, right now, what the market is
expecting and what could get done in Congress based on
how slim the majority is for the Republicans is just
an extension of current policy.
Speaker 1 (17:39):
I think that's wrong.
Speaker 3 (17:40):
I think that the underreported story in the media, the
story this funder report doesn't get reported enough, is a
democratic chaos, but that the underreported story is the remarkable
Republican unity led by President Trump. Speaker Johnson first try
got it instructs out of the House for the budget.
(18:02):
He passed a clean CR first try. Senator or Leader
Thoone pinged it back to the House very quickly with
their instructions. And I had something along with Kevin Hassett
had in a c chair called the Big Six, which
also includes Leader Throone, Speaker Johnson, Senator Crapo, Committee Chair
(18:26):
Jason Smith. And everyone's very aligned. And there's going to
be a lot more bells and whistles other than in
tc other than just changing the date on TCJA.
Speaker 2 (18:42):
So your pitch right now to financial market participants to
consumers is you need to see the entire picture.
Speaker 3 (18:50):
Well, you need to see the entire picture. And as
President Trump said the other day, stay cool. It was
my message when I was out with you. You on April. Second,
it was to the countries. These are maximum rates, So
you ask if it was a Maximus strategy. If you
don't elevate, this is your maximum rate. So don't elevate.
Speaker 1 (19:13):
You have in.
Speaker 3 (19:15):
Markets the upside barrier, you don't have unlimited risk, and
then come to us and we will negotiate.
Speaker 1 (19:23):
In good faith.
Speaker 2 (19:23):
Can you guarantee clarity in ninety days.
Speaker 3 (19:28):
I think clarity is through the eye of the beholder.
But I can guarantee you that we're going to run
a robust process, and I think the market can take
great comfort in that.
Speaker 2 (19:40):
So maybe some of that uncertainty starting to evaporate.
Speaker 3 (19:42):
Yeah, if we measure uncertainty by the VIS I think
that the VIX. I don't want to make market calls,
but I think that the VIC spiked and is likely peaked.
Speaker 2 (19:54):
Secretary Bessant, we really appreciate your time. Of course, that
was Scott Bessant, the US Treasury Secretary here in Buenos Aires,
and his pitch to the world. It's a three legged stool.
In terms of Trump administration's policy proposals. Right now, the
market squarely focused on tariffs,
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