Treasury Secretary Scott Bessent on the 90 Day Pause 5/12/25

0:00Bring in show music, please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Markets cheer a 90-day tariff truce between the U.S. and China. Treasury Secretary Scott Besant on the slashed tariff rate. Now we have a meeting mechanism. We loosely christened it the Geneva mechanism. And the diplomacy ahead. Make no mistake, one of the goals here is to open China for American businesses in a fair way. The travel mess at Newark Airport set to upend summer plans. Are Phil Lebeau with some advice? If you can, go somewhere else. Why risk it? Plus, an executive order to lower prescription drug costs.

0:46And President Trump set to accept a luxury jet from Qatar. It raises questions. Would you accept a phone that the Chinese government gave you or a car that the Russians gave you? It's Monday, May 12, 2025. Squawk Pod begins right now. Stand Becky by in 3, 2, 1. Cue it, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. We're live at the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. And the news of a 90-day lowering of most tariffs between the United States and China to a much lower level, 30 % is what we're talking about, which is well below the 145 % that existed before this, And far below the percentages that Donald Trump was talking about himself on Truth Social on Friday, saying maybe 80 percent sounded like a good number.

1:39Right now, we're looking at the S &P 500. We have basically erased all of the losses that came from Liberation Day since the Trump tariffs, down by just two tenths of a percent at this point. So we've made up all that ground that came back since April 2nd. So markets on the move in a big way. And look, I will say the president himself said last week that you should buy now, that things are going to be very good. This sounds like very positive news coming not only from the U.S. side of this, but also from the Chinese side, the messaging that's been trying to find a way to make it work. I think clearly and to Scott Besson's credit and to this administration's credit, if they can actually get these tariffs down to something much more reasonable, hopefully it'll it'll keep the economy from turning over in the wrong way.

2:24It's 10 on everybody and 20 on fentanyl, I guess. There were even some comments that sounded like they were making progress on the fentanyl side of things, too. Then it'd be 10, which is going to be on everybody, supposedly. Which I'd be very interested in hearing those details on what that means. There is a question, though, longer term, and I actually am so curious to hear from the Treasury Secretary about this. To the extent that part of our goal was to box China out, was to actually make more things back in the United States. all of the other part of this negotiation. So it's funny. The market loves this because they didn't want the tariffs.

2:59But to the extent that you believe in the tariffs, if that's something you believe in, which I think this administration has done and talked so much about, what can you get on the other side, too? Well, I think it raises questions for the tax plan, too. And a huge question about the tax plan in terms of what kind of revenue you're going to be bringing. I mean, I'd rather see this. Our friend Kyle Bass is a big China hawk, obviously. But he said China came begging. to the United States. Thousands of Chinese businesses were shuttered and failed each and every day over the last few weeks. 1 ,800 businesses in Shenzhen and Zhejiang closed in one major area of China this week.

3:34I mean, I think there's something to that. It's nice that we have the Treasury Secretary first here because there's so many questions. So many questions. For more details on the U.S.-China tariff pause, we're going to get over to CNBC's Juliana Tittlebaum, who is in Geneva this morning. So here in Geneva, we witnessed marathon talks over the last two days, eight hours of discussions on Saturday, several hours more yesterday, and they've yielded a major breakthrough. As you noted, we've seen the U.S. and China now agree to slash tariffs for 90 days. So both sides have agreed to cut tariffs by 115 percent.

4:08In terms of China's tariffs on U.S. goods, it's now going to come down to 10 percent. The U.S. tariffs on Chinese goods going to drop from 145 percent to 30 percent because you've still got some levies on fentanyl in there. During the 90 days, the Trump administration, Secretary Scott Besson, saying the two sides will negotiate. The U.S. will continue moving toward a more balanced trading relationship. Take a listen to how the Treasury Secretary characterized the Trump administration's approach to China and these negotiations this morning. Neither side wants a decoupling. And what had occurred with these very high tariffs, as Ambassador Greer said, was the equivalent of an embargo.

4:52And neither side wants that. We do want trade. We want more balanced trade. And I think that both sides are committed to achieving that. That was the Treasury Secretary speaking in this room just a couple of hours ago. He also used the opportunity to stress the Trump administration's fact that they've got a process, a plan and now a mechanism for further talks, seeming to address the market concern that there wasn't a plan in place when the tariffs were announced back on April 2nd. This is clearly a message to the market that a plan is in place and trying to emphasize that they've got a pathway now for further talks down the line over the next 90 days.

5:35Okay, Juliana, on the ground, in the middle of it all, we appreciate you joining us this morning. Thank you. President Trump says he's going to sign an executive order today to lower prescription drug prices to the level paid by other high-income countries. It's called Most Favored Nation Pricing. In a post on his social media network, the president predicted that prescription drug prices would fall by 30 to 80 percent almost immediately. Details outside instituting a new policy aren't yet clear. And a court blocked a similar pricing plan during the President Trump's first term. We've talked a lot about this.

6:13When you look at American exceptionalism, there are a lot of reasons for it. But I think our drug development is a big part of it. The hope that it gives families from everything from rare disease to, you know, diseases like Alzheimer's that take so many people. If you look at it, it's really like our venture capital when it comes to this, because you may have to develop 20 drugs to find one that actually hits. That's a couple billion dollars to develop a drug and only one out of 20. And 19 out of 20 will go bust and not see any return on it. So you make your money back on the one that does it.

6:44I understand the rationale, because the rest of the world, we subsidize. I mean, we subsidize security, we subsidize innovation, we subsidize even tech innovation and drug innovation. But I don't know if this works. It's the way to go about it. And, you know, we had conversations, actually, with the president about he's dead set on this. Well, I think the point that the journal made, was it last week, was it two weeks ago, that when it comes to Medicare, it's 4 % of what's spent in Medicare. And it's much cheaper to have an innovative drug than all the other things. Hospitalizations. The other piece of it is very complicated because you're measuring the innovation side on one side, which we're desperate for.

7:24But there's also the accessibility aspect, which is there are lots of drugs that exist today that people who actually need them can't afford to get. It's a very frustrating part of it. It would be nice to see other countries step up and spend more. If you can't recoup your expenses, there's going to be drugs that aren't developed. I hear you. So I don't know about importing price control. I mean, I don't understand really completely how they can have price controls all over Europe, and it's fine with all the drug companies to just ship that, you know, that, okay, whatever you give us, we'll take.

7:57But here, you know, it's 10 times as expensive. I would rather see this wrapped into part of the negotiations with the trade deals that you're cutting with countries. If you're going to say you have to spend more on your defense, let's say you have to spend more on what you're doing here, too. Well, is it going to hold up in court? Well, it didn't the first time around. That's right. And that was when the drug company sued the administration. It got shut down. But he is, and, you know, he's tired of hearing the crying from the major pharmaceuticals. Maybe patient populations that step up and talk about some of these issues.

8:31And you're right, Andrew, the affordability thing has always been there. A lot of these companies have done a very good job of trying to make sure that once the drug is out there, once they start to recoup some of the innovation costs they put into this, it has been more accessible. It's the United States government that has paid the big. You know, Ackman is an enigma. And we had a great interview with him recently. Did you see his tweets about this? Finally, a president that isn't going to allow the rest of the world basically to just live off of us. Because nobody gets to live off of us. From a negotiating perspective, the other question in the art of the deal is, is there a way by doing this, does it force the other countries?

9:11I'd rather see it brought straight into the trade. And there's already been some conjecture that they're going to have to point up like they do with NATO. And if they do, maybe that's a good thing. I would rather see that happen through the trade negotiations and some of the deals that you're cutting with each of these individual companies, rather than shutting down what is definitely a great part of what makes America so great. We'll see. President Trump preparing to accept a luxury jet from the royal family of Qatar, which the president will then use as a new Air Force One. That's according to sources who spoke with NBC News.

9:44The White House planed to retrofit the$400 million Boeing 747 jet so it can be used in Trump's official capacity as president. Two sources saying the plane will then be transferred to the president's library foundation at the end of his second term, which would then allow him to continue flying on that plane. But Qatar's media attache now to the U.S. called the transfer, quote, possible as that no decision has been made. New Air Force One planes are years now behind schedule and billions of dollars over budget, but the possible gift from Qatar raising some legal and ethical questions. After some of those surfaced yesterday, the president posted on his social network the following.

10:24So the fact that the Defense Department is getting a gift free of charge of a 747 aircraft to replace the 40-year-old Air Force One temporarily in a very public and transparent transaction So so so bothers the crooked Democrats that they insist we pay top dollar for the plane. Anybody can do that. The Dems are the world class losers. MAGA. I have a different take on this. What's your take? Would you accept a phone that the Chinese government gave you or a car that the Russians gave you on some of these things? It's like too easy to just argue it's bugged. Well, either bugged or they could have a kill switch that takes it down at some point.

11:05Not that I think Qatar is necessarily doing that, but there's a reason to not accept Trojan horses from other places. Look, Boeing's a disgrace for not getting this up and running faster. This was put together in the first Trump administration to get the new Air Force One there. They are behind on so many things, and they should have put more focus on this. I don't know how you get around. The emoluments fraud. What's the laws? It's the emoluments fraud. You can't. You can't accept gifts from a foreign government. Right. So I thought it was going to the library afterwards, like, you know, have you been out to the Reagan?

11:32I thought it was going to be sitting there. That's what they were saying, the sort of structural model, if you will, in terms of the approach they were going to take was to try to follow the Reagan approach, except that Reagan put the plane in the library. And the idea, at least in this instance, according to the reporting that I read, I don't know, was that he would be able to continue to fly on the plane. That I didn't think of. That was the sort of concept of how they were going to do this. Yeah, I don't like the idea of the bugging of it. I just wish that Boeing could actually get its act together and we can make a plane that we actually need and want.

12:10And so but apparently he did take a tour of this plane. By the way, it is a Boeing plane. Right. He apparently toured this exact plane when it was, I think, in Florida. Yeah. Well, it's a nice plane. You heard Bernie the other day. I mean, people like us and like Bernie that need to be places. I mean, standing in these lines is a big pain for all of us. And, you know, Newark is one of our airports. I would accept the citation. I'm not looking for a Boeing. I would accept the citation. Citation 10. From those viewers out there with access, we have there's no amount. Or Cutter. Cutter. We do have a clause, though.

12:49I Cutter. We're not allowed to accept either. We love you, Cutter. I think it's called a conflict clause for us. No, we would. It would be some type of double lease back circle. Something we can. I'm just going to. We'll figure out a strategy. You know what, guys? Maybe some guys send a plane and we're going to figure it out. In the Kernan Museum. Afterwards. Which is right. When I'm 100, I'm founding that. Cheese will be next. Coming up on Squawk Pod, the U.S. Treasury Secretary Scott Besant, fresh off a weekend of trade talks with his Chinese counterparts. Are we headed to a rebalance? We do not want a generalized decoupling from China, but what we do want is a decoupling for strategic necessities, which we were unable to obtain during COVID.

13:38And we realized that efficient supply chains were not resilient supply chains.

13:50Welcome back to Squawk Pod from CNBC. After a weekend of talks in Switzerland, led by Treasury Secretary Scott Besant and Trade Representative Jameson Greer, the United States and China have agreed to a fairly large reduction in tariffs. The U.S. lowering tariffs on Chinese goods from 145 percent down to 30, and China, for its part, lowering levies from 125 percent to just 10. This is in effect for 90 days while the two sides keep talking. On our TV broadcast this morning, we heard from Wendy Cutler, a former negotiator in the office of the U.S. Trade Representative. She served in the Obama administration.

14:27It's funny, we entered the weekend in a trade war and now we're in some kind of a love fest.

14:35So how is this playing in China? Our reporter on the ground in Beijing, Eunice Yun, explains that Chinese leadership is taking some leverage from the idea that talk matters and looking like the more responsible party. The social media account that's linked to state TV has said that this proves that China's approach and firm countermeasures and stance, they say, has been highly effective. And a lot of this is because China got most of President Trump's tariffs off without actually having to do a whole lot. What was it like in the room? Treasury Secretary Scott Besant joined us today. Joe Kernan kicks things off.

15:13Mr. Secretary, thanks so much for joining us this morning. We appreciate it. Joe, good to be with you. We know that some of the details of what happened, Mr. Secretary, but can you recount to us some of the color, how it came together? You mentioned that the venue and the equanimity, Was it cordial and conciliatory right from the outset, or would you characterize it as tough negotiating most of the way? Joe, I would characterize it very much as President Trump, the equivalent of President Trump's relationship with party chairman Xi. They have a good relationship, but they both advocate strongly for their respective countries, for their respective citizens.

15:58So it was always respectful. We have the two largest economies in the world. We were firm and we moved forward. We tried to identify shared interest. We came with a list of problems that we were trying to solve. And I think we did a good job on that. And again, this is a 90-day pause. For our tariff program, we had a plan. We had a process. And now what we have with the Chinese is a mechanism to avoid an upward tariff pressure like we did last time. So this is a 90 day pause. Do you expect that tone to continue as these details, you know, the devil's always in the details, get worked out over the next 90 days?

16:50and what aspects do you think will be relatively easy and what will present the biggest obstacles? Well, look, Joe, I don't think anything's going to be easy because this has been going on a long time. But what I can tell you, President Trump in his first term realized a very effective trade deal that was signed in the Oval Office in January 2020. And the Chinese delegation basically messaged to us that the Biden administration failed to hold them accountable for it. So I think that the January 2020, President Trump's highly successful previous trade deal can be a starting point. And knowing that President Trump will enforce any deal, I think, will make the Chinese very deliberate in their negotiations and know that whatever they agree to, President Trump will enforce.

17:51Would you say that the Chinese were you able to detect or was it apparent that there was some urgency to make some progress, given what we're hearing about Chinese businesses being shuttered in mass factory activity, declining PMI, declining, maybe even some social unrest? Could you detect that or was there, for lack of a better term, a stiff upper lip shown to you? Look, the vice premier is a very skilled negotiator. He is a high ranking Chinese official. I had a very good economic briefing beforehand, but there was no sense of anxiety. There was a sense of moving forward. There is a sense of mutual respect.

18:44There is a sense that we had shared interest. But I have seen what's going on in the Chinese economy. We can see what's going on with the shipments to the U.S. And again, we are the deficit country. Historically, the deficit country has a better negotiating position. Mr. Secretary, part of China's plan over the last several years has been to manufacture far more goods than it can ever consume. It exports that not only to the United States, but to other countries around the world. Other countries like the United States and countries in Europe have felt like they're getting dumped on with all of these excess goods that are being manufactured.

19:25Will your talks in other countries find ways to make sure that China can't get around anything you set up in your deals with China by, let's say, shipping goods to Mexico and having those goods come up through Mexico? How do you shut that down? And did that come up this weekend? Well, Becky, that's already happening. That's already happening with many goods. It's happening with autos. It's happening with electronics. So that's part of the negotiation with the Mexican government. It's part of our overall strategy. And Chinese have an economic plan called dual circulation. And with dual circulation, our goal is to make sure dual circulation means export and domestic use.

20:12Dual circulation cannot mean that China overproduces and that only Chinese goods are consumed in China, and then they export the excess to the rest of the world. So we have had the equivalent, because of these high tariff rates, of an embargo on China, and those goods are going to leak to the rest of the world. So our negotiations, we don't need to tell other countries what they need to do. They are seeing this wave of Chinese goods coming to their shore. They have to find a home. And that could be at a discount price, undercutting local producers. Mr. Secretary, I have a question for you, which is the market's obviously very happy about this this morning.

20:54I think the global economy is quite happy about what you've been able to accomplish over the weekend. The question I would ask is how what you've accomplished over the weekend squares to some extent with some of the things that we've heard over the past couple of months from the administration about what the tariffs ultimately could do to both box out China, put pressure on them to do other things for us, to create meaningful additional revenues in the form of tariffs, and perhaps most importantly, to force manufacturing back to the United States. And so by lowering these tariff rates to some degree, I'm sure there are critics who would say that it that it upends some of those goals.

21:37Well, again, Andrew, this is just a pause. The April 2nd tariff level for China was 34 percent. So we have moved that down from 34 to 10. We still have the 20 percent fentanyl tariffs that were put on in February. So just in 2025, we have added 30%. And again, one of the most important things that we're doing, we do not want a generalized decoupling from China. But what we do want is a decoupling for strategic necessities, which we were unable to obtain during COVID. And we realized that efficient supply chains were not resilient supply chains. So we are going to create our own steel, protect our steel industry, work on critical medicines, on semiconductors.

22:35So we are doing that. And the reciprocal tariffs have nothing to do with the specific industry tariffs. We heard, Mr. Secretary, that some progress was made on fentanyl. in that deal, and that's 20 % of the tariff that's going to stay. What progress was made, and how do you see that happening over the next 90 days? And do you expect a deal can be reached? And what does it look like? What do you want China to do exactly with fentanyl? Well, Joe, this is a priority for President Trump and indeed the whole administration. I have a personal stake in this. The two very close friends lost children to this terrible scourge.

23:23Hundreds of thousands of Americans die every year. And I think that we saw here in Geneva that the Chinese are now serious about assisting the U.S. in stopping the flow of precursor drugs because the Chinese brought their trade delegation, led by the vice premier, but they also brought a deputy minister for security who was their fentanyl expert. We brought someone from our national security staff, and they had a very long and in-depth sidebar about how our two countries could work together. As far as some of the non-tariff related barriers that you talk about making progress on, we just had one of our reporters, Eunice, from Beijing, just sort of talking about how the Chinese view things.

24:22They said, yeah, you know, we might talk a good, I'm paraphrasing, we might talk a good game and promise some things, but it's very hard to quantify or to put into writing some of those other issues, whether it's rare metals, even currency. manipulation. How would that be affected over the next 90 days? What type of agreement could you reach that has actual teeth for the non-tariff barriers? Well, Joe, these aren't problems that sprung up overnight. They sprung up over 40 years. So Ambassador Jameson Greer, USTR, has a book this thick of all the non-tariff barriers and then also of the state subsidy for labor and for industry.

25:07So we've got a playbook. President Trump successfully executed a deal in his first term. I think we can build on that. And that's the purpose of the 90-day pause, to see what we can do and work on these non-tariff barriers. Because China actually has low tariffs. It's the insidious non-tariff trade barriers that hurt American companies trying to do business there. And make no mistake, one of the goals here is to open China for American businesses in a fair way. We want American businesses to be able to sell into China. And part of the goal is bringing down these unfair non-tariff trade barriers.

25:57And that's what we will be focusing on. Mr. Secretary, this is a 90-day pause. What comes next? Do you have plans to meet with your counterparts again? Becky, as I said, the good thing is we had a plan. We have a process. Now we have a meeting mechanism. We loosely christened it the Geneva mechanism. So I don't know where we'll meet again. Very agreeable meeting here. We got a lot done over two days. So I would imagine that in the next few weeks, we will be meeting again to get rolling on a more fulsome agreement. Mr. Secretary, we're the import country, obviously, as you point out, China is the export country.

26:42And I believe some of what we're hearing about maybe some of the stress, the economic stress we're seeing in China. But we have had worries and concerns about the economic stress in this country. Is it still coming? In other words, have we just not seen it yet in terms of job losses or consumer confidence? Do you expect the next employment report to show any slowing? Is it not going to happen here or we just haven't seen it yet, in your view? Well, Joe, I don't see any reason that should happen because I think with the terrorists, it's all a matter of calibration. There were approximately 20 % tariffs from President Trump's first term.