Treasury Sec. Scott Bessent: Let’s Examine the Entire Fed 7/21/25

0:00Bring in show music, please. This is Squawk Pod, and I'm CMDC producer Cameron Costa. On today's episode, we're talking trade in an extended conversation with Treasury Secretary Scott Besant. Talks are moving along, but the important thing here is the quality of the deal, not the timing of the deals. And how he views the Federal Reserve. For the Treasury Secretary, the bank's monetary policy isn't a difference of philosophy. He's calling it a mistake. If this were the FAA and we were having this many mistakes, we would go back and look at why has this happened. And Robert Frank on the luxury brand private equity arm that's taking a stake in private jets.

0:47LVMH and FlexJet find a match. Louis Vuitton, of course, has its roots in travel. That'd be cool, like a Louis Vuitton plane. Right. Plus, the rest of today's news, tariff politics, what not to do when you're caught on a Jumbotron kiss cam, and a dominant performance at golf's Open Championship. Royal Portrush, is there a more beautiful, breathtaking venue? I like Pebble Beach. It's Monday, July 21st, and Squawk Pie begins right now. Stand Becky by in three, two, one, cue, please. good morning welcome to squawk box right here on cnbc we're live from the nasdaq market site in times square i'm becky quick they caught us along with joe kernan and andrew ross you in fact do listen to coldplay i do i do not i and i like coldplay i like chris martin i'm cool with joe's idea it was shocked that andrew wanted to go along with it and then he couldn't make him stop Well, you started it.

1:46It's very sick because I wanted to be the one hugging Andrew. Oh, I don't know. We're arguing about who's the man, I think, which is very insane. You know what? I didn't. I told you this could go wrong. I thought, which it just did. Meanwhile, Treasury Secretary Scott Bessent recently made the case to President Trump why the president shouldn't try to fire Fed Chair Jay Powell and focus more on the possible adverse economic impact and the potential that the Fed could, in fact, cut rates later this year. That's according to an article in The Wall Street Journal, which some say says which some says that some of Trump's advisers think trying to push out Powell could present logistical challenges in addition to hitting the financial markets, resulting in a lose-lose scenario for the president.

2:35Following the Journal's article yesterday, Trump responded on Truth Social saying nobody needed to tell him firing Powell would create market volatility. He said, quote, I know better than anybody what's good for the market and what's good for the USA. If it weren't for me, the market wouldn't be at record highs right now. It probably would have crashed. So get your information correct. People don't explain to me. I explain to them. Talking about explaining, we're going to be speaking with Treasury Secretary Besant this morning, where we will get an explanation of all of this and more. Right. Markets at new highs.

3:09They're probably going to cut a couple of times anyway. They'd be in the courts till May, probably, when he's leaving anyway. way. We'll talk to, I'm sure the Treasury Secretary will have an explanation that's somewhere in between the two things. Yeah, of course I don't explain things to the President, but I did weigh in on what I thought, you know, was the correct path to follow from here. And then you can, it's the, there's a lot of interesting things to talk to him about today. The EU is interesting in what Letnick said yesterday. Japan's interesting in light of the elections. So there's a lot of maybe not as much heat as the other.

3:54We'll get to it all, hopefully, with the Treasury. And nine days till that August 1st deadline. And nine days till the August 1st deadline. And there's some, you know, conflicting ways to look at what happened in Japan. And number one, the guy that sort of was losing a little bit of juice over there didn't want to settle with tariffs. But the Journal points out, look, they're a stable trading partner. They got their issues with inflation and other things. This is not the time to really play hardball punitively. So European Union countries are asking the EU's executive body to prepare some harsh retaliatory measures on the U.S.

4:34if America can't get an EU-focused trade deal done by August 1st. This is according to the Journal. But again, there's two sides of this, too. People are holding out hope on both sides that it doesn't come to that. It says U.S. officials told the EU's head of trade that they expect President Trump to ask for more concessions in order to reach an agreement. Commerce Secretary Howard Lucknick, though, talked trade with the EU yesterday. You mentioned this earlier on CBS's Face the Nation. On August 1st, the new tariff rates will come in, but nothing stops countries from talking to us after August 1st.

5:12But they're going to start paying the tariffs on August 1st. Down, I guess. Despite those comments, Lutnik said he's confident the U.S. will get a deal done with the EU. Reportedly, President Trump wants more than 10 percent at this point. That's what the EU figured was likely and maybe as high as 15 or 20. Big trading partners with us. It probably does make it. This one does probably make a difference. And if we could get a decent trade deal, it probably would be good for us. And as Joe mentioned, we're watching Japan and paying attention to what's happening with the Japanese yen today as well.

5:50The country's premier is vowing to stay on and oversee tariff talks with the United States, even after his ruling coalition suffered in elections for the country's upper house. Japanese bond yields had jumped as we headed into that elections. Some investors think that the premier will be more susceptible to opposition parties advocating for tax cuts and welfare spending in a country that's already struggling with debt. The markets were closed in Japan for a holiday today, but we will be watching the equity response in terms of that tomorrow. And Scotty Scheffler winning the Open Championship. That's the third leg of a career grand slammer.

6:29He's got two Masters in a PGA earlier this year and now the British Open. And this is the word, or pick your word, it was a cruise to a four-stroke victory at Royal Portrush yesterday in a dominant performance. He's the first player to win their first four majors by three shots or more. The Tiger analogies are there. The only difference I would say is he's so good and you take it so much for granted that it doesn't have sort of the same drama. But Tiger did the same thing, but it was different. Tiger would win by eight or ten strokes or something and you would be, you know, just blown away. And you should be by Scheffler because the way that where he puts it in the fairway.

7:18Scheffler shot down the Tiger comparisons yesterday. He said, I've won four. Tiger won 15. It's a way he's got a way to go there. Twenty-nine years old. Twenty-nine years old. But all those guys. I just said he grew up watching Tiger and was in awe. Sure. And his little son and everything. He says that's a lot more important. That was nice to see. That was what he said before. Royal Portrush, is there a more beautiful, breathtaking venue? Did you see much of it? I like Pebble Beach. Pebble. But from different angles at Portrush, it was just unbelievable. A great place. What else was I going to say?

7:53It was, oh, okay, we've got a 240-yard par 3 where if you lose it, I think it was to the right, you're totally... I don't know where I would hit it. I'd have a driver, number one. These guys are hitting five irons. They're hitting five irons, and most of them. The gentleman from mainland China, what a great player. He had a great sense of humor. Did you see much of it? Not a lot. I did mini golf this weekend. You did mini golf? Okay. How'd you do? That's close. What was there, a windmill, a clown's mouth? Waterfall. Water cave. Waterfall. Different colored balls? Yeah. Different colored balls, so everybody knows which one.

8:33Yeah. The best ones are when it has, like, the double one. Yeah. Oh, one hole, and then it's in. You get one hole, then it has to go to another hole. That's to me. Does a hole-in-one count? Like, can you say I've had a hole-in-one at golf? Yes. My son hit one. He got a hole-in-one. So in his life, he can say... At mini-golf, no, that doesn't really count. What might be a loser for us is when Andrew sneaks up on me and puts his arms around me. I've seen it's now on... It's made X. It's made it become a meme. This is all I'll say. Someone put a circle around it, too, you know, to make it look like a real kiss cam.

9:11That's what I... That's all that was missing. Here you go. It's the kiss. There were some good cold... There were some really good... I saw some great... You see the Philly fanatics? They did it. The Philly fanatic and a female Philly fanatic did it. What does all of this schadenfreude say about us, though? I don't know what it really says about us deep down. It means if you do get busted, just act like everything's fine, because no one would have known anything. Right? Well, that's true, I guess. I hadn't thought about it. No one would have seen what was on that stupid... Now is probably a good time to check social media for the full understanding of Joe and Andrew's reenactment of the Coldplay kiss cam moment.

9:49You can follow our team on X at Joe Squawk, Becky Quick, and Andrew R. Sorkin. The meme is the message. Up next on Squawk Pod, an extended conversation with Treasury Secretary Scott Besant. The deals in progress and the administration's pressure on the Federal Reserve, including whether he himself tried to talk the president out of firing Jay Powell. President Trump solicits a whole range of opinions and then makes a decision. So he takes a lot of inputs. And at the end of the day, it's his decision.

10:29This is Squawk Pod from CNBC with Joe Kernan, Becky Quick, and Andrew Ross-Sorkin. Here's Joe. All right, let's get to Washington for our next guest. Joining us now, Treasury Secretary Scott Bessent. Mr. Secretary, it's great to have you on, as it always is. Good to see you. Morning, Joe. Lead story, economy showing swagger as tariff fears ebb. This is the Wall Street Journal pointing out that there was quite a bit of angst and hand-wringing back in April. A lot of forecasts at the bottom was going to drop out and just flatly stated here. And I know it might not be the favorite paper around the White House at this point, but they say.

11:11But that did not happen. And the economy is showing swagger now. But the secretary August 1st is a week from is a week from Friday, I think. And I think that's on everyone's mind. Any progress that you can report on some of our big trading partners? Look, Joe, talks are moving along, but the important thing here is the quality of the deal, not the timing of the deals. And President Trump has created maximum leverage, as only he can do. And what we are seeing is these imbalances built up over 20, 30, 40 years. And we are more concerned with high quality deals than getting these deals done by August 1st.

11:59Our trading partners were told that the rates could boomerang back toward the April 2nd levels. We can continue talking then. But, you know, again, we're proceeding at pace with the negotiations, but we're not going to rush for the sake of doing deals. Can we talk specifically about a couple of the countries we're talking about? And I'll start with the euro block. There was reportedly some messages sent to the EU that tariffs, the president's going to want more. He's going to want more than what the euros had thought maybe at 10 percent and maybe 15 percent or higher. There's word that they are preparing to retaliate or taking some tough action.

12:55But then Commerce Secretary Lutnik yesterday said he still thinks that there's room to maneuver and that there will be a deal. What are you feeling? 50 percent likely that there will be. I know you don't want to necessarily show the United States as him. But do you expect the deal to be done before August 1st with the euros or could it get ugly? Well, Joe, it doesn't have to get ugly. It's the nature of a negotiation. There's a lot of back and forth. But I will tell you, as you know, I'm not an economist. I'm an economic historian. And the nature of deals like this is that we are the deficit country.

13:33So the surplus country will always feel it more. We have a gigantic trade deficit with the EU. And so with the level of tariffs, it will affect them more. So I would imagine that they would want to negotiate faster. They got out of the blocks in a slow pace. They become more engaged. But as I've said many times, it's 27 different countries. And then you have the EU sitting up on top. So you have this supernatural national organization negotiating. And I do think that some of the underlying national governments are frustrated by the pace. But again, it's an EU negotiation, not a country by country negotiation.

14:24Trying to handicap Japan, too, after the election over the weekend, this secretary. On the one hand, some people thought that he was the gentleman that has less, I guess, power at this point, that he was sort of a difficult person to deal with. I thought that might make it more likely that a deal could be done with Japan. But there are others that say that the United States shouldn't be too tough on Japan because we need a stable partner and they've got plenty of internal issues right now. What's your feeling on the developments of the weekend, how it affects negotiations with Japan? Joe, I arrived back from Osaka late last night, and I saw Prime Minister Shiba.

15:13I saw the trade negotiator, Akazawa. We didn't talk about trade. I was there to represent the United States at the International Expo. And I can tell you the U.S. pavilion there is fantastic. So anyone who wants to go over and see it, it's what we used to call the World's Fair. And our our priorities are not the internal workings of the Japanese government. Our priorities are getting the best deal for the American people. I've known the president a long time, and he always asks people for their opinion on things. I don't think it I don't think that it would be criticism if he if he were to acknowledge that there would be criticism if he were to acknowledge that he asked you, what about firing Jay Powell?

16:00And you gave him your comments. And how much of this story is real? Is it in between? And I'm talking about the notion that you urged him not to fire Jay Powell. And he actually is obviously he's the president. He can do what he wants. But did you have a conversation? Well, you know, Joe, I think the problem with stories like this is I'm not sure who the leaker was. But the problem with leakers is they only have partial information. And I think the other problem, too, is that newspapers like The Wall Street Journal are not used to a high functioning executive president. They are used to perhaps President Biden, perhaps President Obama, who was not as economically sophisticated as President Trump.

16:46President Trump solicits a whole range of opinions and then makes a decision. So he takes a lot of inputs. And at the end of the day, it's his decision, just as it was his decision on Iran. And look at the tremendous success there. Look at the tremendous success at the border. And that is what a great executive looks like. Would you just offer up what your opinion would be on firing J-PAL if the president were to do that? Do you think that would be a good idea or would you dissuade him from that? Look, Joe, I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful.

17:34I'm speaking, actually, I'm going to be in the building this evening. There is a regulatory conference that begins tomorrow. I'm the keynote speaker tonight talking about regulation. The Fed deals with monetary policy, regulations, financial stability. And again, I think that we should think, has the organization succeeded in its mission? You know, if this were the FAA and we were having this many mistakes, we would go back and look at why has this happened? I mean, look at the, as you said, at the top of this broadcast, there was fear mongering over tariffs. And thus far, we have seen very little, if any, inflation.

18:30We've had great inflation numbers. So, you know, I think this idea of them not being able to break out of a certain mindset, you know, all all these Ph.D.s over there. I don't know what they do. I don't know what they do. This is like universal basic income for academic economists. Mr. Secretary, we had Elizabeth Warren on last week and we asked her point blank what she thought would happen to the market. If, in fact, Jay Powell was somehow ousted or pushed out or fired or or something like that, she said she thought that the market would crash. What you think would genuinely happen to the bond market, the dollar, the equity markets?

19:15I think they crash. Remember, the way the independence of the Fed works, it provides a signal both to our country and to financial markets around the world that on a couple of key points, particularly monetary policy, what we've done in the United States is we put someone in charge who's supposed to filter through all of the economic data and then make a decision independent of politics. Our Fed chair's term does not run coextensive with the term of the president. The president does not have the authority to fire the Fed chair. The Fed chair is different from all of the cabinet officials. All the cabinet officials can say, as they have, I will do whatever the president of the United States wants me to do.

20:06I will do what is in the political interests of the president of the United States. The Fed chair sits in a different box. He has different tools and he is supposed to be independent and make those decisions. I disagree with him often in this case about how he's made those decisions. But the independence itself is a value. It's a value to the United States. It's a value to our markets. If Donald Trump destroys that, then he brings down those markets. What do you think? I think Elizabeth Warren, Senator Warren, is entitled to her position, is entitled to her opinion. And I think that we, I'm not going to deal in hypotheticals.

20:59And the Chair Powell's term ends in May. There's also another seat coming up in January. January. So, you know, we'll see. And by the way, Senator Warren at times has been one of Chair Powell's harshest critics. So, you know, it kind of amuses me that now she's taken the other side of the other side of the argument here. Mr. Secretary, a couple of quick questions. First of all, I realize this is entirely up to the president to decide this, but do you think it's possible that the deadline for tariffs could be extended for countries where you feel like there are productive talks? Again, Becky, we'll see what the president wants to do.

21:47But again, if we somehow boomerang back to the August 1st tariffs, I would think that a higher tariff level will put more pressure on those countries to come with better agreements. We just reached an agreement with Indonesia, and I saw five turns of their offers, and this started several months ago. I thought their first offer was very good. They came back, the offers kept getting better and better, and we ended up with a fantastic trade agreement. I think there was something, and don't quote me here, but I think there were 11 ,000 lines of tariffs that got taken out, including non-tariff barriers.

22:34We have a 19 percent tariff on them. They have zero tariffs on us and they are going to do a massive purchase of agriculture and Boeing airplanes. So that's what a good trade deal looks like. But there must have been five iterations of that. We a lot of what we're doing, I guess, revolves around China on the trade front. We haven't heard anything new there. We have seen some rare earth exports pick up. Obviously, there was I would say it's an olive branch that we gave to NVIDIA in terms of allowing China access to some of those chips. That would seem like that might induce China to to maybe enter more seriously in the talks.

23:24What's the latest on China? Joe, we're going to be engaging in talks in the very near future. And the talks are in a very good place. We had a meeting in Geneva, a meeting in London, and I think trade is in a good place. And I think now we can start talking about other things. The Chinese, unfortunately, are very large purchasers of sanctioned Iranian oil, sanctioned Russian oil. So we could start discussing that. We could also discuss the elephant in the room, which is this great rebalancing that the Chinese need to do. They have 30 percent of the world's export manufacturing, and that can't get any bigger.

24:14and it should probably shrink. And what the rest of the world is seeing is now that we put up this tariff wall around China, China is not manufacturing any less. So those goods are going to Europe, Canada, Australia, into the global south and flooding those markets. The president has seemed to take a dim view of the prospects for any progress with Russia and Ukraine. Are we now in the position to actually, is there a plan for sanctions against Russia? When would that happen? Would that be near term? Are you involved with that? Well, Treasury leads the financial sanctions. Our OFAC division does that.

25:05But, Joe, in my mind, what's groundbreaking here is that the Senate, and I think there would be 80 or 90 senators who want to pass a sanctions bill. And President Trump has single-handedly changed the paradigm here because included in that bill is a, we don't know what the deadline will be, whether it's 10, 30, 50 days. But any country who buys sanctioned Russian oil is going to be subject to up to 100 percent secondary tariffs. So now the United States Senate agrees with President Trump that tariffs are a means to political ends. And this is revolutionary. President Trump has changed the conversation here.

26:00And I would urge our European allies who have talked a big game to follow us if we implement these secondary tariffs. I just want to end, and I know you've got to run, but we made the point with Speaker Johnson that in an economy that's doing very well, it's not typically thought that you should cut interest rates. So the more that the Trump administration points out how strong the economy is, kind of undercuts the argument that lower rates are needed. Judy Shelton, the economist, she takes issue with the notion that a, you know, that prosperity causes you to causes inflation or she doesn't think it's a demand problem.

26:48She thinks it's a supply problem. Is that your take, too, that a strong economy doesn't necessarily cause inflation? Joe, I think you and I can look back to the 90s, and I think that's what the paradigm or the mental model for everyone should be here. Because in the 90s, we finally had the productivity growth kick in from the IT revolution. And I would say that we are on the cusp of that right now. I was out in Sun Valley last week for a day, met with a lot of the tech leaders. And they think that the AI revolution is coming much faster than they thought could start kicking in as soon as the first, second quarter of 26.

27:34So we could go back to non-inflationary growth. And if the inflation numbers are low, then we should be cutting rates. And also think about the distributional impact here, because the housing market, which affects the majority of American households, American households are locked out of owning homes. So a substantial decrease in rates would unlock the mortgage market. Yeah. The did you see the Kevin Wors last week? I mean, you probably, you know, you've got a real job, but he made some similar comments about AI maybe being the power of it for productivity, not necessarily realized yet. Did you see that?

28:24And you think you think he'd make a good Fed chair? Well, I didn't see what Kevin Warsh said, but I do. I'm in regular touch with a lot of the Silicon Valley leaders. I am in regular touch with a lot of the business leaders. And I think this is going from concept to reality. And I think we are on the cusp of a productivity boom like we haven't seen that can really drive the economy. So the economy is very is accelerating. The one big, beautiful bill is going to lead to a CapEx boom, which I think has been held back. I think companies necessarily had to wait until the bill was passed. So I would think in the third, fourth quarters, we're going to see that.

29:17And there is a chance that we could have this golden age of high growth, low inflation. Wouldn't it be nice? All right, Mr. Secretary, thanks for all your time this morning. We appreciate it. Hope to see you again in the near future. Thanks. Good to see you. Cheese will be next. Coming up on Squawk Pod. Time is the ultimate luxury. Our Robert Frank on one of the biggest names in high-end retail, taking a 20 % stake in FlexJet. But flying private is more than just fancy logos. You know who the first person to say that was? Times of Luxury. Gordon Gekko. No way. We'll be right back.

30:02You're listening to Squawk Pod. Here's Andrew Ross-Organ. One of the biggest names in luxury about to take off with a big investment in private jets. Robert Frank, the one and only who would know all about this, joins us now with more. Good morning. Good morning, Andrew. Great to see you. Well, LVMH is expanding its reach into the private jet market with FlexJet. L. Catterton, that's the private equity firm that is backed by LVMH, is leading an investment of$800 million to buy 20 percent of FlexJet. FlexJet, of course, based in Cleveland, will use the proceeds to buy more large jets and add infrastructure, especially in Europe, where they're seeing a lot of growth right now.