US Treasury Secretary Scott Bessent Talks Tariffs, Fed, Treasuries

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I'm pleased to be with Treasury Secretary Scott Bessett this time. You're back on Bloomberg in Argentina. Thanks for joining us again.

Good good to be with you, Good to be in Buenos Aires.

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.

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 they announced on Friday, or large currency adjustment has allocated twenty billion to them. The World Bank has allocated twelve billion.

Two.

What I think is historic in terms of bringing Argentina back from the precipice.

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?

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.

Can any country go to zero again?

We'll see.

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 big menu there.

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.

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 amounts of debts onto these countries' balance sheets. It's undisclosed

China has a foreign exchange swap with Argentina. Would you consider a credit line directly from the United States.

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 IMF announcement, so that is going to be rolled forward for a year.

But do you want them to get rid of that swap with Beijing?

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.

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.

No, no, no, no.

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. 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.

Going to move fast.

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.

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.

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.

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?

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.

So if you think will be first, it's their choice.

Is there a handful of countries that you expect to have a deal before the ninety days is up.

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.

So we're talking about a dozen or seventy plus.

I think it's going to depend.

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 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.

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?

I view not giving away negotiating secrets on worldwide television as the essence of negotiating.

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?

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 carrying the buckets, like they're not going to stop manufacturing because the US.

Has a terriff wall up. So those goods are going to go somewhere.

Where do you think they're going to dump?

Well, I think it depends on the good.

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.

But you were asking where are they going to dump?

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.

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?

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.

I mean, these are big numbers.

I think no one thinks they're sustainable, wants them to remain here.

But it's far from a joke.

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?

Well, maybe the trade minister has a different sense of humor. I do, but I don't see anything funny about it.

Do you see a decoupling though, between Washington and Beijing?

There doesn't have to be. There could be.

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, 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.

Are you teasing out a Mara Alago accord that we should be paying attention for in the future.

I'm not sure what you're talking about.

Oh, potentially getting all these trading partners together to discuss fair balance trade.

Well, we're doing that over the next ninety days.

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.

I don't think there's a dumping.

And I think we saw in the TIC data either today or Friday that actually foreign ownerships picked up.

We had two, we had three big.

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 you get these moves.

So you don't think it's sovereigns. Potentially it's hedge funds unwinding.

I have no evidence that it's sovereigns.

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.

But it's the wrong reason.

Now, I forget what they hit on Friday, maybe for forty something.

We saw a.

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.

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 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.

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.

Global reserve card, we are still a global reserve currency that we have a strong dollar policy.

The dollar can go up and down to go and look.

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.

Have you spoken to the Fed at all about contingency plans though? If financial stability risks flare up.

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 a long way from that.

So when was the last time you guys spoke? We had breakfast last week?

We had breakfast last week and it wasn't away game.

I was over at the Fed and.

No concern so far from the Fed chair and what he saw on the treasury market.

I think we would have heard from the Fed chair.

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.

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?

Well, we think about it all the time.

I think, when are we going to start the interviewing candidates?

And that'll be some time in the fall.

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

Well and Marie, I've.

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 the FED Controller of the currency and the FDICE. So I think it's very easy to delineate between those two.

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?

Well, look, the Treasury has lots of things we can do, but again I think we're a long way.

From that, but all options would be on the table.

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.

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. Last week it was JB. Diamond, And there uncertainty, especially

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, 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

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.

I think that's wrong.

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. He passed a clean CR first try. Senator or Leader Thoone pinged it back to the House very quickly with

So your pitch right now to financial market participants to consumers is you need to see the entire picture.

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.

You have in.

Markets the upside barrier, you don't have unlimited risk, and then come to us and we will negotiate.

In good faith.

Can you guarantee clarity in ninety days.

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.

So maybe some of that uncertainty starting to evaporate.

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.

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,