Treasury Secretary Scott Bessent & CC Sabathia 4/28/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Treasury Secretary Scott Besant on negotiating tariff policy. The negotiations with our Asian trading partners are going very well. How's it going with one country in particular? China, which is facing levies from the U.S. of nearly 150%. It's up to China to de-escalate because they sell five times more to us than we sell to them. And America's pastime getting fresh attention, baseball great CeCe Sabathia joins us. The game is in such a good spot. With boardroom investor Rich Kleiman on new partnerships and opportunities on the diamond.

0:46Ratings are up, attendance is up, merchandise sales are up. The league has never appeared to be as global as they are now. Plus, what's on your pizza, what's in your house, and what animal spirits will drive the market this week? There was some negativity yesterday, and I'm curious how people react this morning. The negativity is causing that four-point loss on the Dow. It is Monday, April 28th. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square.

1:23I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. Here we go on a Monday morning. And maybe you breathe a sigh of relief with this. The major averages all coming off their second positive week out of the last three. The S &P was up by 4.6 % last week. The Nasdaq was up by close to 7%. If you take a look at what was happening with the Dow, it was only up by about 2.5%. But check out the Treasury yields. We are seeing yields come down a little bit, at least for that 10-year. It's down to 4.26. The two-year is just below 3.8%. It's at 376. That day where we were down over 1 ,000 last night, my mind is mush.

2:00But that was Monday, I think. And we didn't close down 1 ,000. We closed down... That was the day the S &P was down around, all the way down to about 5 ,100. So... And then Tuesday was the day that President Trump changed his tone. Right. Yeah. But the previous week, we didn't trade on Friday because that was a good Friday. So the close on the 17th... Thursday. On Thursday was where it was almost 5 ,300. So that's why 5 ,300 to 5 ,500 is only 4%. But if you went to 4.6%, 4.6%. But if you went to the low of 5 ,100 or 51 on Monday, it got all the way back to 55, 25. So that's well, I think it was.

2:44And the Nasdaq was strong. What was the Nasdaq up to? The Nasdaq was up by half last week. It was like 7%. It was 6.73. Almost 7%. I mean, we'll take it. But largely on the back of reporting, or I don't want to say reporting, statements made by the president that he was in a deal talking to, by the way, the Chinese, and had all these other deals. Right. I think it's kind of interesting. We'll talk to Scott Besson about it right now. Because so many of these comments now seem to suggest that something is politely amiss. What do you mean? Well, the left in this country would much rather believe Xi than Trump.

3:22If someone's lying, they're going to say Trump's lying. So I understand that. But we can actually get it from the horse's mouth today and find out. I don't know why they would take China's side, really. But we'll see. Hopefully, you saw that China is exempting a lot of things that they absolutely need. As we are. Which shows you how important it is, probably, that we do have some type of relationship. We can't decouple. It's not going to help anyone. Well, let's not say what he said yesterday. Let's say what he said yesterday. All right, but we'll ask him today. Just the idea that these tariffs at 150 percent, that's unsustainable on both sides.

4:00So there will be changes that we'll see. We're going to drill down on what he said and get the real news today from Scott Besson. He didn't say anything on ABC. Well, no, but I think, and by the way, I'd be curious whether you think that the markets, The futures this morning are related to that at all. What's that? I'd be curious to know whether you think... Nothing going on in the market. I know, but whether you think that there was some negativity yesterday, and I'm curious how people react this morning to whatever... The negativity is causing the four-point loss on the Dow? Maybe we can come back from that.

4:31We'll try. Big piece of... Warsh has got a big piece. Everything's summarized in the journal. It is. Warsh spoke on Friday to the IMF, and it was picked up by a lot of news organizations over the week. This is former Federal Reserve Governor Kevin Warsh leveling some pretty sharp criticism at the central bank, though. Warsh is seen as a frontrunner to replace the current Fed chair, Jay Powell. He was speaking at a conference on the sidelines of the IMF and the World Bank annual meetings in Washington on Friday. Warsh slammed the Fed's recent policy record and called for what he is calling a strategic reset.

5:03Among the critiques, he said that the Fed's six point seven trillion dollar balance sheet was evidence of policy overreach. He said that overreach has made it easier for Congress to spend money, knowing that the central bank would subsidize the cost. He criticized Fed officials for over communicating their views and economic targets and relying too much on what he sees as flawed economic indicators. And he criticized the Fed for weighing in on politically charged issues like DEI and climate change, said that was overreach in a big way. Now, Kevin Warsh was on the Federal Reserve back in 2008, 2009, and he said some of the things that he did, he was absolutely on board.

5:41QE the first time around, he said he broke with the Fed after QE, too, and that's when he resigned and stepped aside. He pointed out that Paul Volkler, after that weekend of some of the things that they did, said the Fed has gone to the very edge of its lawful implied power, transcending certain long embedded central bank principles and practices. He called that the equivalent of a brushback pitch, high and tight, from an institutional ally to his successors and says that they really should be looking at this. Now, I think it's interesting from the perspective of Kevin Warsh kind of showing some of his conservative credentials.

6:16It sounds very hawkish. It sounds very hawkish, though. If the president is looking for someone to cut rates, I don't know that Kevin Warsh would be the one. Well, except we did have this idea that if you had you would have the credibility to cut rates. If you were seen as a hawk and then you started to cut the rates, then people might think so. It could be, I'm just the skeptical version says maybe this is all part of that. I think his bigger problem is with the Fed's balance sheet that has never tightened up after. They never withdrew any of, and they never do. And there's a word for that. When there's a crisis and a crisis and government does something, they never stop.

6:53They never pull back on the measures that they took, or it's very difficult to pull back. I thought it was fascinating, and I didn't really realize it, that the Fed's full employment mandate. It was a secondary mandate. Well, that should be. But they got swept up in the DEI ESG, and it was a full employment mandate, not just overall employment, but for certain groups. And now they don't say that anymore. They're also sort of backing off. But he pointed that out. I didn't know that the Fed and the climate change stuff, that why the Fed would be, well, that is beyond me. But my takeaway was how hawkish he's said.

7:32He's always been hawkish. We knew that. He always has been. We knew that. But I guess if you focus on the balance sheet, that's a slightly different issue than the president is focused on with just the overall rate structure. But he said it was, what did he say? It was a factor of 10. It grew from when he was there. From when he started, yeah. The size of the balance sheet was, You don't measure it in terms of you actually need exponential growth instead of additive. All right, a big shift coming right in the heart of this spring housing market, something we haven't seen in quite a while. Diana Olick joins us right now with more.

8:07And what's the shift that we're seeing right now, Diana? Well, Becky, it's prices. They are still gaining slightly, but they are slowing down quickly. And in several major markets, they are now lower compared with a year ago. Take a look at these numbers from Parcel Labs, which runs real-time price data. Miami, Atlanta, Tampa, San Francisco, Nashville, and Minneapolis are now negative year-over-year in prices, and Austin, a major pandemic migration market, is tanking. Other large markets like Phoenix and Denver, they're right on the verge of being in the red. Now, another report from Redfin showed home sellers gave concessions to buyers in 44 % of sales transactions in Q1 of this year.

8:47That's up from 39 % a year earlier and just shy of the 45 % record high at the start of 2023. Those include money toward repairs, closing costs, and or mortgage rate buy downs, but not price cuts. Now, something else in the March numbers. The median price of a newly built home was slightly lower than that of an existing home, and there is usually a price premium for new construction, so that's not normal. Part of this is builders lowering prices and offering more low-priced homes and still a relatively tight and overpriced existing home market. Now, remember, home prices are up over 50 % in just the last five years, which again is something else not exactly normal.

9:29So even with builders cutting prices and more supply coming on the existing home markets, buyers have hit the pause button right at the height of the all-important spring market. Becky? Why do you think buyers are pausing? Does it have anything to do with mortgage rates, or is it more related to uncertainty and concern about what might be happening with their jobs? It's all of the above. In fact, we were at an open house in Dallas yesterday, and I spoke with several buyers who said, you know, they like the house. There's plenty out there. They have the money to do it, but they're just hitting the pause button because they're nervous.

10:03They're nervous about what kind of other of their costs are going to go up due to inflation. They're worried about their jobs. They're worried about the broader economy. And they're saying, you know, we're out shopping. We're looking. We love it. just can't pull the trigger. I guess part of it is watching mortgage rates. I don't know if people expect rates to come down, if they think the Fed's going to be forced to cut rates at some point, if they've watched particularly what's happened recently with rates climbing higher, just from concerns all the way around. No, actually, mortgage rates weren't as big a factor, and I was surprised at that.

10:36I think people are getting used to this new normal of the kind of above 6%, around 7 % because mortgage rates have really been kind of teetering in this very narrow range between 6.7 and 7.1 % really over the last year. They said it's not necessarily the mortgage rate. It's that overall uncertainty about how they feel about their own personal wealth. Remember, as I always say, a home is most people's single largest investment. And it's really hard to make that payment when you're worried about the rest of your economic situation. Diana, thank you. News about a company I kind of love. Domino's Pizza just reporting for us pizza lovers.

11:16Earnings coming in at$4.33 a share. Topping, as in like topping, like you could have toppings on your pizza. Topping expectations of$4.06. I almost said like toppings with pepperoni. But anyway, revenue of$1.1 billion just below estimates. Domino's U.S. comparable store sales fell half a percent. The street was looking for a slight increase. Meanwhile, international comps growing 3.7%, topping expectations. Are you guys pepperoni people? I've got a long history. You know, a mushroom person? With Domino's, with my son. I'm a pepperoni, and now he's, Tuesday night, every, we've got a son like this.

11:55We do, things are very planned out. And Tuesday is Domino's. And we get two. I get a large. I only have one piece now because of my trying not to eat much salad. And then he eats a cold the next day. So we get a large extra sauce plain and a large extra sauce pepperoni, if you must know. But it's every single Tuesday. Coming up, chicken parms, Friday night. Cheese will be next. Coming up, trade talks on, trade talks off. Are we talking to China? Treasury Secretary Scott Besson. Tariffs are just one tool in his toolbox. The administration has an escalation ladder, and they're a little afraid to use it.

12:43What we haven't done is escalate by embargoing those goods or putting a trade ban on those goods, which we could if we needed to, to gain more leverage. The art of the deal and much more Squawk Pod ahead.

13:03Welcome back to Squawk Pod. Up on Becky, Q. You're watching Squawk Box right here on CNBC. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. All right, let's get right to our newsmaker of the morning and the latest on everything, not just tariff negotiations with China. Treasury Secretary Scott Besant is with us, and it's good to see you, Mr. Secretary. Welcome. Good morning, Joe. If you see any other reporters yelling next year like last time, you just tell them from us that they need to move it over or do or do something. I don't hear it. I think we're looking good at this point.

13:42All set. OK, where are we? I know that there's a lot of questions. We just mentioned China. Let's start with China. Where are we with China? Are there negotiations? Was there a phone call with President Xi and President Trump? You know, Joe, Treasury Secretary does a lot of things, running the White House switchboard in one of them. So, all aspects of government are in contact with China. And in terms of trade negotiations, we'll see where this goes. But as I've repeatedly said, I believe that it's up to China to deescalate because they sell five times more to us than we sell to them. And so these 125, 145 percent tariffs are unsustainable.

14:38We also hear about all the different countries that may be ready to deal on some level, whether it's tariffs or currency or whatever. Do you have any idea how close we are and who could be first. And is it possible, Scott, that there could be a template that could be we wouldn't have to do each one individually? Because it seems like it's very complex and just would extend the process to months or even years to do 100 different countries. Is there any way to do something that looks almost standardized? And who would we do it with first? Well, Joe, we do have a standardized template. We're not going to share it.

15:22But as I've said before, there are 15 to 18 important trading relationships. As you said earlier, we'll put China to the side. That's a more complex negotiation. And with the other 17, especially with the other Asian countries, we've had many countries come forward and present some very good proposals, and we're evaluating those. But I tell you, Joe, when I look at these proposals and some of them are really willing to lower their tariffs, lower their non-tariff barriers. But I look at what they're proposing. I just think, how did we get here? How did we get here? And I agree with President Trump.

16:06I don't blame it on these countries. I blame it on the past administrations. And it's going to be a big victory when we make progress in getting these tariffs, non-tariff trade barriers, currency manipulation, state subsidies of labor and industry off. There's been quite a bit of consternation expressed about the U.S. brand and the U.S. losing its preeminence as a place for capital allocation and investment. I want to bring up, I just happened to see it this morning, one of our frequent guests, Kyle Bass, points out, OK, you're going to go somewhere else rather than the United States. It's Europe is anti-growth, anti-capitalist, pro-tax, super regulatory, loose collection of broken economies and points out that the Euro stocks 50 index has had a one point eight six percent annualized return for the past 20 years.

17:06The S &P 10 percent plus. Are you concerned that that this could snowball into a point where where would they go? So if you don't go to Europe, where would you go? And where will Europe go? China? Is that what we're worried about? Well, Joe, look, what this administration is committed to is keeping the U.S. the best place in the world for capital to arrive. And we are doing that. We're going to have tax certainty. We are going to not be taken advantage of in trade anymore. and we are going to deregulate the largest, the deregulated large economy in the world. If you look at the Draghi report, he says that Europe has basically tariffed themselves.

17:56I think it's 50 % on goods, 100 % on services, and we'll see if they can make any progress there. The other thing I would tell you is I imagine that the Europeans are now in a panic over the strength of the euro. And you're going to see the ECB start cutting rates to try to get the euro back down. Europeans don't want a strong euro. We have a strong dollar policy. We just saw this unfortunate incident where China claims sovereignty over a Philippine island. Are you going to send your capital to a country that behaves like this? Mr. Secretary, I have a question that relates back to China, but also back to a comment that you made last week that I think actually moved the market.

18:44So last Tuesday, you had a meeting that J.P. Morgan hosted. This was this private investor summit. And your comments either leaked out or got out. And those comments, if you really look at the market, moved the market materially higher on the back of them, where you said, quote, there will be a de-escalation in the very near future. That was the quote. And so my question to you is, what confidence or assurance do you have, having made that statement, when it now appears, maybe I'm misunderstanding it, that when you did meet with the Chinese last week during the IMF meeting, you did not talk about tariffs yourself.

19:24And it sounds like you're not engaged or involved in these China tariff discussions yourself. Maybe the president is. I know he said that he is. But you said that you don't know about those conversations. Well, Andrew, first of all, to clarify the meeting with J.P. Morgan, there was nothing that I said in that meeting, nothing that I had not already said in the mainstream media 72 hours before. So I was surprised when the market rallied. And if you were to look at what happened after the meeting, after I sat down for a press conference, markets sold off. So if you bought during the meeting, you actually lost.

20:01To get to the meat of your question, that it's a complicated relationship with China, but it is my belief that which is unsustainable will not be sustained. And again, the Chinese business model is predicated on selling subsidized goods into the U.S. And it's just not a long-term business strategy for them. So I am sure that they will come and want to deescalate. Right. But that's just so we're 100 percent clear. And by the way, you may very well be right. I actually happen to agree with you on that front. But I'm agreeing with you in the context of just my presumption that that is correct, not because I've engaged in conversations with them directly.

20:49And it sounds like you haven't either. Just just we're all on the same page. Andrew, you know, just to feed the news cycle, I'm not going to talk about where we are or not. what we're going to do is create the best deal for the American people. And that is obviously not done on television. Mr. Secretary, last Friday, Time magazine published an interview with President Trump where he said that he could see a year from now 50 percent tariffs on goods coming from China. Is that a future you could envision? Again, Becky, we're going to have to see where the de-escalation takes us. President Trump is leading for the important trading partners.

21:31President Trump is leading the negotiations and we'll see what he decides on. Mr. Secretary, earlier this morning, Japan's economic minister said that there would be no change to our stance that we are demanding full removal of U.S. tariffs. Can you speak to where our conversations are with the Japanese because clearly, at least publicly, they seem to be pushing back. Well, you know, again, Andrew, if they want to litigate the negotiations in the press, they have an election coming up, an upper house election coming up in July. So I can't imagine that they would say anything else. You know, I don't think they're going to come out and say, oh, whatever the U.S.

22:16wants, sure, we'll do it. But I will tell you that the negotiations with our Asian trading partners are going very well. Vice President Vance was in India last week, talked about substantial progress. I have mentioned that the negotiations with the Republic of Korea have gone very well. And I think we've had some very substantial negotiations with our Japanese allies. Secretary, China quietly says here, exempting certain goods from tariffs that they need, which shows their dependence on a lot of, or interdependence with the United States on many, many different things. Similarly, the Trump administration has announced quite a few exemptions on some of the reciprocal tariffs for things that we absolutely need here.

23:11Isn't this sort of an opening for what negotiations would look like? Would you just take a complete decoupling with China off the table right now? Since we know global trade has benefited the globe. We don't want zero global trade. But doesn't this indicate what's at stake here? Well, Joe, I think this makes my point that the Chinese, they are exempting all these goods, tells me that they want to de-escalation. And what we haven't done is escalate by embargoing those goods or putting a trade ban on those goods, which we could if we needed to, to gain more leverage. We haven't done it. They've actually given us a list of what comes from the U.S.

24:04that is valuable to them. And I can tell you, I do have an escalation ladder in my back pocket, and we're very anxious not to have to use it. Mr. Secretary, Gary Cohn was on Face the Nation yesterday, and he said that he thinks we're weeks away from starting to see the effects of this actually show up, whether it be in prices or I guess to some extent you could suggest in shortages of certain items. Where do you think we stand just in terms of how long it will be before Americans really start to feel this? Becky, I can't tell you what various retailers have done in terms of stockpiling, in terms of substitution, in terms of elasticities.

24:45I didn't see Gary's interview. Mr. Secretary, I have a separate question about Apple and maybe manufacturing in the U.S. or manufacturing as it relates to this trade war potentially with China. You saw last week that there was a news story. Apple may be moving or may try to move all of its manufacturing of iPhones that are exported to the United States or imported into the United States, moving that manufacturing from China to India. And I'm curious what you think of that. That might be an improvement from having it manufactured in China, but it's also not manufacturing it here in the U.S. Well, Andrew, I think maybe it speaks to China being an unreliable trade partner.

25:32And again, these aggressive actions against the Philippines. So and as I mentioned, I would guess that India would be one of the first trade deals we would sign. So watch this space. Mr. Secretary, we assume that regardless of what we hear or in being reported and sourced or however it's going on, that there are discussions going on between the United States and China at all times and probably at most different levels, both high and low. Should we ignore a lot of the noise and just assume that in Ertus, both countries are trying to, as you say, de-escalate? Can we put that in the bank? Well, Joe, these are the two largest economies in the world.

26:23So there are a lot of touch points. As you know, last week was IMF World Bank. In D.C., I had my Chinese counterparts here, and we talked about, why don't you talk about it, IMF World Bank meetings. You talked about financial stabilities. You looked ahead to trying to prevent financial crises. You talked about global financial regulation. So there are lots of touch points all the time. Okay. We'll leave it at that then and just assume that both sides have an interest, a mutual interest, I think, in getting to a better place. We appreciate your time, as we always do. Mr. Secretary, thanks. Good to see you.

27:11Look, he may be right. Long term, I think we do have leverage over this. The question, of course, is how much patience we all have, ultimately. I'm trying to figure. And I'm not so sure. I was looking at it whether I don't want to invest in Europe versus the United States. I don't know if a lot of people want to do that because they do have a lot of systemic issues. And just historically, we know how the average is. that performed there and how it grew. The question, I guess, then comes, if Europe is going to invest outside itself, would it actually align itself with China? And would we drive other investors into China's arms?