Treasury Secretary Scott Bessent: The Market’s Detox 3/7/25

26:20And then we'll see what the other levels are. But in terms of the actual budget negotiation, tariffs won't be part of the pay-fors. It will be something that's in the background. I think people wonder, you've laid out a whole lot of reasons why there's unfair trade around the globe. But I think people wonder with why start with Canada and maybe even Mexico first. Just the idea that they tend to be better trading partners. We had a former U.S. ambassador, Bruce Heyman, the U.S. ambassador to Canada earlier this week. He said, you guys went after those three because that's where the money is, because he thinks it is going to be used.

26:58It's money you need. You need to be able to show and start bringing that money in. And that's why them first. Yeah. No, the reason it's first is because of fentanyl crisis. that I'd have to vigorously disagree with Ambassador Hammond that it's the fentanyl crisis on the southern border, on the northern border, and all these precursor drugs from China. I called it a radical departure. Maybe it's not really a radical departure. I want to talk about the dollar and wonder whether there's the slightest crack in what we've had from every Treasury Secretary. I mean, we always ask them the same thing over the years.

27:39I've been here so long. I've been through so many Treasury Secretaries. I've never heard a Treasury Secretary say that they're not for a strong dollar. But a weak dollar would really be an answer to a lot of what you're talking about here in terms of trade deficits, in terms of, you know what a weaker dollar does for future obligations that we have with$37 trillion in debt? That makes it a little easier. Lower interest rates implies probably a weaker dollar. Would you accommodate a weaker dollar at all? Is there any motivation at all to let that happen? Or do we have the strongest dollar policy that we've ever had?

28:19There's no change in the strong dollar policy. But I can tell you, when you think, what does a strong dollar mean? There's the Bloomberg Currency Index, and the dollar is very strong on that. than their bilateral trading relationships. And is the dollar strong or weak on that? And is it strong because of U.S. fundamentals? And I can tell you, we are committed, this administration, President Trump, are committed to the policies that will lead to a strong dollar. If we bring back more manufacturing, if we have cheap energy, good tax policy, deregulate, we will end up with a strong dollar. But what is unacceptable is in a bilateral relationship, other countries trying to weaken their currency.

29:08And so we are against the currency manipulation on a bilateral basis. But globally, the strong dollar is very important. We will continue as a reserve asset. and I think anyone who has an inclination that this administration thinks differently on that's wrong. As far as the president paying attention to the stock market or the equities market or not paying attention, in the past we thought that that is how President Trump at some point gauges his success as president. Now, he doesn't need to be reelected this time in four years. It's the market's been up 20 percent in the last two years, obviously.

30:01So is there any perception with him that that he's playing with some house money? He said that at one point in the past. And I guess what I'm getting to is how long or what type of levels on the S &P do you think you would need to see where he might that might influence some of his policymaking decisions? Look, President Trump takes in a lot of information every day. And stock market's part of it. That, again, as somebody who was on the other side for a long time, and you say, where's the Trump put again? There was no Trump put? Well, there's no put. The Trump call on the upside is if we have good policies, then the markets will go up.

30:48He says he's not watching the stock market very closely. Are you? I watch everything. Okay, what's the best put? I mean, you know how the media covers things, and we're down 6 % on the S &P. From what you read on a daily basis, it feels like we're down 60 at times, although the NASDAQ is down in correction territory at this point. I'm just wondering what if we ever went down 20 percent on the Nasdaq or 15 percent on the S &P with people that want Trump to fail, that's going to be splayed across every newspaper in the world. I'm just wondering whether the tolerance for something like that for the administration.

31:29Well, look, as you said, Joe, market was up 20 percent last year, 20 percent. So there is some house money. No, no, no. I'm going to put it another way. Okay. Did the Biden administration succeed? The American people weren't buying it. Just because the market was up, they voted out the Democrats. I have a question related to the regulatory or deregulatory agenda, which I think is part of what you're arguing on a long-term basis is going to help the economy. There's two things that I'm fascinated by. One is that it sounds like the FTC, at least, and the administration is thinking of trying to extend or at least be very similar.

32:06I mean, that's to what the Biden agenda was before. I don't know. And that was sort of some of the commentary about sort of what the next version of regulations look like, which surprised me. The second thing that I was surprised by was actually mergers and acquisitions activity in the month of January, which I would have thought would have been up, but actually was down 30 percent as if January was back in 2015. And what that says about the confidence to the extent that you believe that M &A activity is a barometer of confidence. Well, Andrew, MAGA doesn't stand for make M &A gradient, but I think that, again, with deregulation, with the more thoughtful oversight at the FTC, and I think the two new leaders at the top are very thoughtful, that we will see a pickup in corporate activity.

32:59I think what we've seen over the past 60 days or the past six weeks since President Trump's been in, it doesn't tell us very much. And again, what will we have seen? I've been meeting with a lot of banking heads, investment bank heads, and I think that things are going to loosen up. Mr. Secretary, can we just talk a little bit about the Democrats got voted out in spite of the big run-ups in the market? And I think a lot of that was because of inflation and because what average Americans were feeling at the grocery store, at the price at the pump, what they were paying for insurance, what they were paying for housing and rent.

33:40We did hear from a lot of CEOs this week who said that the tariffs could lead to price hikes almost immediately this week and next week. The CEO of Target talking about prices for fruits and vegetables that we rely on so heavily on Mexico this time of year. Best Buy saying that they would see price hikes that would go into electronics. AUTOMAKERS SAYING YOU COULD SEE PRICE HIKES PRETTY SIGNIFICANTLY BY NEXT WEEK EVEN. I JUST WONDER HOW MUCH TOLERANCE YOU THINK THERE IS FROM THE AMERICAN PEOPLE. YOU'RE TRYING TO HELP THE BOTTOM 50 % OF WORKERS. THEY FEEL THOSE INFLATIONARY PRICES AND IT HITS HOME A LOT HARDER.

34:16WELL, BECKY, WE 'LL SEE HOW THE OVERALL INFLATION NUMBERS WORK OUT. that obviously energy is a big component. So we'll see that go down. Committee to Unleash Prosperity, Steve Moore's group has some very good data on how regulation affected the average household. So if we're cutting that, so that's why I keep urging people to look across the entire spectrum if you get a one-time price adjustment. And the other thing too is, are we going to, for the bottom 50 % of wage earners, can we see real income gains for working Americans? Because I think that was the problem last time, that the top 10 % did great, and the bottom 50 % got crushed.

35:07So if they start seeing real wage gains because the private sector, as opposed to the governments producing the jobs, then I think that would be a big offset. The other night, President Trump said that he wanted to balance the budget as well. So we're going to have the big, beautiful bill eventually, maybe. And I guess the 2017 tax cuts, would you like to see those extended permanently at this point? If you add in a lot of the other tax on tips, no tax on Social Security, add it all in, you're not going to get anywhere near a balanced budget unless there's some cuts. I don't know whether Doge does it.

35:46What about Medicaid? At this point, it is the one, I don't know if you want to call it an entitlement, but it's been growing, outpacing Medicare, outpacing Social Security. And it may not be doing what it was designed to do at this point. It's doing a lot more. At least states have tried to get it to do a lot more. Is any Medicaid cut on the table? Well, I don't know if it has to be a cut, but certainly. Slow down in the increases? Well, slow down on the increases or just looking at the system and empowering states. We had a governor's conference two weeks ago at the White House, and a lot of the states would prefer to do it themselves.

36:27And I'm sitting in the most prolificate state for the Medicaid, and New York, Illinois, Chicago are big spenders. So could more states get more money? Some states have to rein in the overspending. Sure. What else would get us anywhere near a balanced budget if we have all these tax cuts? Well, growth. If we change the growth trajectory, again, as I was telling Andrew, that when I was on this side of the wall with CBO, I think it doesn't hit anyone. The CBO scoring assumes 1.7, 1.8 percent growth linearly. So if you hike taxes, growth doesn't move. If you cut taxes, the growth doesn't move. So I think if we make the current tax regime permanent, then we will grow if we deregulate as we're planning to do and if we re-industrialize.

37:30Is that a precursor for saying we're not going to look at the numbers or you're not going to look at the numbers from what the CBO says in terms of what the budget's going to look like? It may not look balanced according to their numbers, but it may be something that you guys say, forget it, we're not paying attention. Well, if someone were always wrong, would you look at the numbers? I think they were a trillion and a half off in the last scoring. When you had your meeting with President Zelensky, and we've talked about this, I don't know whether you're Treasury Secretary, State, I don't know.

37:59I think you're a little bit of all those things. And you've got... Joe, it's 100 % Treasury Secretary. I know. But you were over there. And I just want to get a feeling because... Was that last Friday? Was that when that... The meeting was last Friday. A week ago. Yeah. So there have been disruptions in maybe the way we approach global trade. And also maybe what our allies think of this in terms of security across Europe, the Russia-Ukraine situation. I wanted to get your comments. Did you think he was going to sign? Were you under the impression that when you were there that the deal was done and he was going to sign?

38:36Zelensky. Zelensky. And did you, were you treated badly? Can you give us an idea of behind the scenes, what happened in that meeting? In Kiev? Yes. Yeah, so I thought it was very important for me to go to Kiev and speak with President Zelensky in person in his office. We had a vigorous discussion for 45 minutes or an hour. He did not want to sign the economic partnership agreement there. I explained to him that the purpose of the agreement was to bring the Ukrainian people closer to the U.S. people. That we wanted, part of President Trump's peace plan was to show no daylight, no daylight between Ukraine and the U.S.

39:28So he did not want, he chose not to sign the deal that day. I asked him, I said, we're going to go out there. There are 50 reporters. What do you want to say? and he said, I am going to tell them that I will sign in Munich. He was meeting with Vice President Vance and Secretary Rubio. He didn't sign the deal in Munich. So then the Ukrainians requested to come to the White House and wanted to sign the deal. And what do you think was going on, though, in his mind? You think he was pushing this out because he thought he could get a better deal? He thought that it was punitive? I think he has this recursive loop of these two words, security guarantee security guarantee and the security guarantee is twofold one that as the u.s.

40:15has more of an economic stake in ukraine in the success of the future of ukraine because i tell you like this deal there is nothing for the u.s. if the ukrainian economy doesn't succeed so there's an economic and implicit economic security guarantee and prior to his visit on friday president trump had hosted president macron of france prime minister stomer of uk these were fantastic meetings the european leadership to the extent they are the european leadership was on board with a plan for the europeans to provide troops on the ground the security guarantee without Americans. The American troops and the NATO backstop starts at the Polish border and President Zelensky kept pushing for this security guarantee.

41:09But I tell you this was one of the most epic on goals in diplomatic history. All he had to do come in the White House, have a press conference, we were having a private lunch. If he wanted to try to renegotiate that would have been the place to do it, not on worldwide TV, and then we were going to go sign the deal. He says he'll sign it now. Where do things stand? Well, he said he signed it two other times. Where do things stand? What's going on behind this? Well, we're going to have to see. The sequencing was supposed to be economic deal, and then, again, move the Ukrainians closer to the American people, get the confidence of the American people that their money is being spent wisely and then go and negotiate in a stronger position with Vladimir Putin.

41:56So now I think after President Zelensky's performance last Friday, we're going to have to see that he is in favor of a peace deal. Can I ask a question just about Russia? Do you imagine over the next couple of years that American businesses will return to Russia as part of whatever ultimately happens here? Andrew, again, the situation is very fluid, and everyone is going to jump into the next thing, that there is definitely a peace deal. President Trump wants a peace deal. He is working hard, and he acknowledges that you have to speak to both sides. And look, he's behind the scenes. He is negotiating just as hard with President Putin, but you can't negotiate with him if you don't speak to him.

42:40Given what happened with you in Kiev and then with what you said was going to happen in Munich, I would think that maybe the president and the vice president, that didn't occur in a vacuum, what finally happened last Friday. I mean, they knew full well what had transpired at that point. Does that explain maybe how things went sideways so quickly? No. Were you treated well in Kiev? I heard it was a dark room that he was, I don't know, there was some arrogance. Look, I think President Zelensky, understandably, is under a lot of pressure. A lot of pressure, because I can tell you in his office, the whole building's dark.

43:24And there's sandbags in the building because they're afraid of a drone getting in the building. It's all security. Yeah. So, I mean, you think you have a lot of security in Times Square.

43:37But he, I think, has to acknowledge that the security guarantee is coming from the Europeans. Have you spoken to him since? Sorry? Have you spoken to him since, President Zelensky? When he came to the Oval, sure. No, I mean, have you spoken to him since last Friday? Well, I don't speak with President Zelensky, and I have not been in touch with my counterpart, the finance minister. 100 % Treasury, I think. Although you just gave a pretty good summary. All Treasury all the time. Of what went on. Isn't being in business with Ukraine and the mineral business, is there an implied security there? Does Russia not understand that there's an implied security arrangement there with the United States?

44:23Joe, so it's not only a mineral deal. It's an energy deal and it's an infrastructure deal. And my view of what do the Russians think about this is, so to get to Kiev, you fly to Poland, take a 10-hour night train in, that four hours before I arrived, for the first time since November, the Russians bombed Kiev. So I believe one person died, four were injured, including two children. And so I believe that that's what the Russians think of this deal. They don't like it. I'm going to ask you just a different question. Maybe this is a political question or a philosophical question. There are some critics of what we're doing as it relates to minerals with Ukraine who say, you know what, the work that the U.S.

45:10has done with Ukraine was done on behalf of democracy, was done as a gift, that it wasn't a quid pro quo for some kind of economic situation. And it wasn't something that, you know, I don't know if you believe that the terms of whatever the deal are too tough on Ukraine. But what do you say to those people who say, you know what, we've gotten a benefit by supporting Ukraine thus far, even without genuine economics this way? Well, I would tell them to look at the deal, which most people haven't seen, can't see yet. And let me tell you what the deal is not. It's not one of these rapacious Chinese deals where we come in.

45:56We we don't have any mineral rights. We don't have any. This this is an economic development deal. So this is to the extent I've said a lot. I said in my speech of the Economic Club of New York yesterday. Economic security is national security. We want to help Ukrainians succeed economically. You know, Poland, which sits next door to Ukraine, Poland and Ukraine, when the Iron Curtain came down, had the same size economies. Poland is three and a half or four times bigger now. And I'll tell you who doesn't like this deal is the Ukrainian oligarchs who tend to have their hand in the till. So we want to make sure that the money goes to the Ukrainian people.

46:39You've got to be able to talk about everything, Scott. Okay, Bitcoin. the reserve. Supposedly, there is disappointment that we're not going to be buying Bitcoin outright using taxpayer dollars. But if we can do it in a revenue neutral way, we would. Number one, were you a proponent for the reserve? And two, is there a way to buy Bitcoin, not just acquire it through, I don't know, however we've gotten these$17 billion worth at this point. So Joe, I am a big proponent of the U.S. taking the worldwide lead in crypto. I think we have to bring it onshore and they use our best practices and regulation.

47:21I think that the Bitcoin reserve before you can accumulate it, you have to stop selling it. So what we have now is from a seized asset pool. And I I wasn't there when it happened. But I believe what happened was about 500 million of Bitcoin was seized, half of it was sold, and what we have now that, you know, say it's over 10 billion, 10, 12 billion, that's all through appreciation. So the first thing to do is to put, it's to stop the selling. So we are going to, you know, after the victims are paid and all of that, any seized assets will go into this reserve. And then we'll see what the way forward is for more acquisitions for the reserves.

48:11And we're starting with Bitcoin, but it's an overall crypto reserve. So how do you think about buying, though? And how should taxpayers think about that? Because effectively, we'll be levering ourselves to some degree, given that we don't have a surplus of money right now, to make these investments. Yeah, so that's why the first step is to stop selling. And then we're going to put a plan in place from there. So we're having this crypto summit. I'm going back to Washington this afternoon, and then we'll talk about the way forward. Can I just ask you about the IRS? It's the largest bureau of the Treasury Department.

48:49And Doge has come up with a plan to cut about half of the 90 ,000 workers there, about 45 ,000. The president was very clear this week that it's the secretaries who run the departments, not Doge. I just wonder if you agree with a cut of that size, particularly when there have been points raised and studies done that suggest that for every dollar that the IRS spends on enforcement and trying to go after bringing in revenue, brings in about$5 to$12. Yeah, I'm not sure where this cutting half the employees came from. What we did was there were 15 ,000 new employees. We did an evaluation. We kept about half.

49:30The ones that, Becky, to your point, were deemed essential to collections. Somehow the other 7 ,000, United States of America, collected taxes for 250 years without them. And look, this is playoff season for us. Game day is April 15th. And I have three priorities with the IRS. the collections, privacy, and customer service in that order. So there's nothing, nothing I'm going to do to hurt the collections. Over time, we are in the midst of this great AI boom. And I think increasing headcount now would be just the wrong time as the private corporations are moving into AI. And I can't think of a better application for AI than auditing tax returns.

50:23How are tax returns this year so far? We don't have the data. About the other thing, too, is when you ask about physical employees, 90 % of the filing is now done online. Yeah. I guess we started with tariffs. Maybe we should maybe end with tariffs. And there's a piece in the journal today about the president's ability constitutionally to levy tariffs and that he has invoked some emergency powers in the fentanyl case to do it. But the journal is basically questioning whether, if you don't use fentanyl as a reason, that whether a U.S. president can unilaterally levy tariffs. Do you have a view on that?

51:08Well, Joe, if you want, I could geek out for you. So the. Yeah, we love geeks. It's my it's my natural habitat. So we that what you're seeing now, the the tariffs based on the fentanyl at the border is something called IEPA. That's an emergency statute. But there are three ones or two thirty two's there. There's a whole range of actions. Jameson Greer just came in, was confirmed last week as USTR. He has a lot of experience and deep knowledge of the legalities. I am sure that he will be by the book. I think that there were 4 ,000 legal challenges to President Trump's terrorists last time that withstood the test of time.

51:59So, yes, it's not the administration doesn't have the ability to say, let there be tariffs. But everything we do is based on a specific rule of law that we will invoke. Every time you finish something, I'm thinking about something else that I want to ask you. I don't know where Alex is, but can I ask, can we go a little bit longer? Fine. Really? All right. Well, the show's over at nine. I don't know. I got to get to the crypto side. Yeah. China. Would you ever say that, that we're ready for a trade war? We're ready for any kind of war. I thought that was a little bit strange to hear that coming from China.

52:44And I guess where I'm going is. In a perfect world, if we could be rivals in terms of business with China, but loyal trading partners, or at least trading partners, it would benefit both countries. Does the president want to get there eventually with China? Well, look, I think he wants to get to fair trading, and we're a long way off. And again, I will point to look how he has gotten the Europeans to finally pay their fair share on the global defense budget for the Western alliance. So can we, China needs to rebalance. So they have been exporting their economic practices to us. Can we use tariffs to push back against that and force a, or encourage a rebalancing, which almost every economist but believes needs to happen.

53:42And so the China relationship is very complicated because in the past, our economic partners, our biggest economic partners were also our allies. We are now military rivals with China and economic rivals. So it's very tough to disaggregate that. So are they using their big surpluses to build up for this big military buildup? The answer is yes. Could they tone down their military ambitions? Maybe. But again, I like to stay in my economics lane and there's a lot to do there in terms of to get to fair trade and again that I would say that anyone who was commenting on this doesn't understand that these the surplus country the surplus country is the one who will see the most problems in a trade war the deficit country will do better.

54:47I don't know. You seem very comfortable talking about security. You and Rubio, I think there should be like a hotline. What should multinational companies who do business in China think? So I know Apple, of course, has a lot of business in China. They've now made a big pledge to do a lot of business in the U.S. But does that change the dynamic in terms of will they ultimately get a carve out on tariffs? There's lots of other businesses that invariably do business in China as well? Well, I know that Apple is diversifying their supply chain. They made a big push into India. We've seen Vietnam pick up as a trading partner.

55:26So we're already seeing corporates take action. I'm on the record as saying I think the only good thing to have come out of COVID was it was a test run for what could happen if we really got into a deep economic war or the unthinkable happened and we got into a kinetic war. So everyone has realized that optimal supply chains are not reliable supply chains. Do you think that President Xi will make a move on Taiwan? I asked, by the way, there was some very interesting comments by Elon Musk earlier this week where he even seemed to suggest that there was a relationship that, you know, maybe this would actually happen sooner than later.

56:11I follow President Trump's lead, and he is confident that President Xi will not make that move during his presidency. One more newsflash, I think we wanted. That's what we live for. Thank you for all the time that you gave us today, Treasury Secretary. Good to see you. Great to see you. Come on back, please. Good. Look forward to your book. Thank you very, very much.

57:01here on Monday. Enjoy your weekend. We are clear. Thanks, guys.