US Treasury Secretary Scott Bessent Talks Tariffs, Fed, Treasuries
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Bloomberg Audio Studios. Podcasts, radio, news. I'm pleased to be with Treasury Secretary Scott Besson. This time you're back on Bloomberg in Argentina. Thanks for joining us again. Good. Good to be with you. Good to be in Buenos Aires. Yeah, it's fantastic here. So you've come here.

at a time when the IMF has just announced this $20 billion agreement with Argentina. But we haven't seen a Treasury Secretary come to Argentina since Trump's first administration, and that was for a G20. So why the emphasis from the Trump administration on Argentina? Well, Anne-Marie, a couple of reasons.

the reason for being here today is today's a fulcrum day so the melee administration has done three adjustments and this marks the beginning of the third one so they did a large fiscal adjustment a large monetary adjustment and they're doing a lot they announced on friday a large currency adjustment imf has allocated 20 billion to them

The World Bank has allocated $12 billion, and I wanted to come here today to show support for President Mele and his commitment

to what I think is historic in terms of bringing Argentina back from the precipice. - When it comes to the trade negotiations, I'm sure you spoke with President Milley about the 10% rate that Argentina was hit with. Do you think at some point that can come down to zero? - Look, I think we're gonna start the negotiations and just like with everyone else, I'm telling them bring your A game, we'll see what you got and we'll go from there. - Can any country go to zero?

Again, we'll see. I don't know what's gonna happen with the negotiations because we've got a whole

box of things we've got to overcome, tariff, non-tariff trade barriers, currency manipulation, and subsidization of labor and facilities. So there's a big menu there. There's been an early focus on Latin America writ large from the Trump administration in the first 100 days. Is Latin America policy also, in a sense, China policy for this administration? Well, I think that might be a good...

description because what we are trying to keep from happening is what has happened on the African continent where China has signed a number of these rapacious deals marked as aid where they are really, they've taken mineral rights, they've added huge amounts of debt

onto these countries' balance sheets. It's undisclosed to any of the other international organizations. They've got tolling arrangements. So they're guaranteeing that future generations are going to be poor and without resources. And we don't want that to happen any more than it already has in Latin America.

China has a foreign exchange swap with Argentina. Would you consider a credit line directly from the United States? That's not under consideration in terms of... So they have an $18 billion credit swap in RMB. Argentina, under the previous Peronist government, drew down $5 billion, and that will remain outstanding. The Chinese show very good faith effort after the announcement or...

a conjunction with the IMF announcement. So that is going to be rolled forward for a year. But do you want them to get rid of that swap with Beijing? Well, I think as this administration continues their

stay the course on their economic policies, they should eventually have enough foreign exchange inflows to be able to pay that off. So less than two weeks ago, you and I were talking outside of the White House after what the president called Liberation Day. And you said you weren't part of the negotiations. Now you're leading them.

What's changed in these past 12 days? No, no, no. What I said was I didn't construct the actual... Tariff rates. The tariff rates. I've always been part of the tariff policy. I had been focusing on tax. Maybe you want to talk about that later. That's going very well. And now with the trade negotiations, I'm going to be part of that.

and the president has hit a 90-day pause button, and we are moving quickly with many of our most important trading partners. So we had Vietnam in last week. We had

Japanese in on Wednesday, South Korea next week. So it's going to move fast. And we're but the important thing for your viewers to know is we're setting up a process and we are going to run that process. It's going to be orderly. And at the end of the day, especially for the most important trading partners, the president's going to be involved.

So when it comes to the current negotiations this week, you're also sitting down again with the Spanish negotiating team, excuse me, the Japanese negotiating team and also the Spanish economy minister? Well, the Spanish economics minister was just a prearranged meeting. He and I have never met. So that is not a trade sit-down. The Japanese meeting is a trade negotiation. The Japanese prime minister recently said he's not going to rush.

to get a compromise, a negotiation. How quickly do you think you can see these deals come to fruition? Well, again, I think there will be advantage to our allies especially and a first mover advantage. Usually the first person who makes the deal gets the best deal. So who do you think will be first?

It's their choice. Is there a handful of countries that you expect to have a deal before the 90 days is up? Oh, I think there could be numerous countries. And it may not be the actual trade document, but we will have agreement in principle and be able to move forward from there. So are we talking about a dozen or 70 plus?

I think it's going to depend, but we're going to move with all deliberate speed. And again, it's going to be a process. It's going to be USTR who just has mountains of data that they've been collecting over the years. Because in a funny way, the tariffs are the easiest part.

So a country with high tariffs, you can just say, okay, this, this, this, this, get rid of it. It's the non-tariff trade barriers that are more insidious, more difficult to spot. And it's probably going to take a little longer to exercise those demons. When you said you weren't part of the rates in that chart that the president held in the Rose Garden...

Is he taking a maximalist approach? Neil Dutter recently wrote that President Donald Trump has cracked a lot of eggs and now Scott Besant, the Treasury Secretary, needs to make an omelet. Is that how you view this situation right now? I view not giving away negotiating secrets on worldwide television as the essence of negotiating. You recently talked about getting deals done quickly with partners to then confront China together.

When you're in these negotiations with trading partners, are you looking for them to offer up something to combat Beijing? Well, I think combat's an aggressive word. But look, I think now that we have the China tariffs in place,

that they are going to want to have some protection from Chinese goods flooding their markets. That China's business model is like from that Disney movie where the brooms are carrying the buckets. They're not going to stop manufacturing because the U.S. has a tariff wall up, so those goods are going to go somewhere. Where do you think they're going to dump? Well, I think it depends on the good.

We have exemptions now, though, for electronics. So we still expect electronics to come into the United States with the smaller tariff rate, the fentanyl, 20%.

But you were asking where are they going to dump. I think it will depend on what is the good, higher value-added manufacturing goods likely in Europe, Canada, in the G7, and then kind of more of the bobbles and knickknacks in the global south. China's commerce ministry came out when the tariff rates were going above 100% and called it, quote, a joke.

Has there been negotiations on any level between Beijing and Washington right now? Well, look, it'll come from the top. President Trump, Chairman Xi have a very good relationship. And I wouldn't say that these are not a joke. I mean, these are big numbers. I think no one thinks they're sustainable, wants them to remain here. But it's far from a joke.

Well, they just say that the rate is so high it's become a joke. Basically, does it just stop trade between Washington and Beijing altogether? Do you see a decoupling of these two economies? Well, maybe the trade minister has a different sense of humor I do, but I don't see anything funny about it. Do you see a decoupling, though, between Washington and Beijing? There doesn't have to be. There could be. There's a big deal to be done at some point, but look...

what is different with China that is different in the history of trade that normally if you go back to the big trade deals or the currency deals in the 80s the Plaza Accord the Louvre Accord the the Reagan Auto uh deals we were our leading economic

competitors were our military allies. China is both our biggest economic competitor and our biggest military rival. So that's going to require a special kind of formula. Are you teasing out a Mar-a-Lago accord that we should be paying attention for in the future?

I'm not sure what you're talking about. Well, potentially getting all these trading partners together to discuss fair, balanced trade? Well, we're doing that over the next 90 days. Okay. So shifts in tariff policies has had markets on edge. Even the president recently remarked that the bond market was, quote,

queasy. Do you have a sense of who is dumping U.S. assets? Who's been dumping U.S. treasuries? I don't think there's a dumping. And I think we saw in the tick data either today or Friday that actually foreign ownerships picked up.

We had three big auctions last week, and on the longer end auction, 10-year, 30-year, we saw increased foreign competition. So I actually think this is one of those occasional VAR shocks that you get in the trading community. I think a lot of people got very leveraged maybe out over their skis, and then you combine that with some real money competition.

selling and you get these moves. So you don't think it's sovereigns, potentially it's hedge funds unwinding? I have no evidence that it's sovereigns. And look, Anne-Marie, not you, but the nature of journalism is to create a headline that 10 days ago when 10-year yields hit 390 said, well,

Secretary Besson got what he wanted. He got 10-year yields down, but it's the wrong reason. Now, I forget what they hit on Friday, maybe 440-something. We saw a 50-basis move last week in 10-year yield. At the same time, the dollar was weakening nearly 3%. How do you simultaneously look at

at that situation. It feels like investors are dumping U.S. assets. Well, look, I've learned that not to look at what happens over a week. I, for better or worse, have lived through a lot of these things. And in trading, in one's personal trading history, it's the scar tissue that sticks with you the most. I can tell you exactly where I was standing in 1998 when the long-term capital crisis

the debacle happened. That had nothing to do with anything other than a bunch of geniuses up in Greenwich who had too much leverage. - So you're not concerned at this moment about the US dollar or the US treasury losing safe haven asset? - No. - We're still a global reserve currency. - We are still a global reserve currency that we have a strong dollar policy. The dollar can go up and down. If you go and look back at President Trump's first term,

I don't remember the exact number, but the dollar,

In 2017, went down, I can't remember, 7, 8, 9 percent. And then once the tax bill was done, took off, took off for the remainder of his term. Have you spoken to the Fed at all about contingency plans, though, if financial stability risks flare up? Chair Powell and I have breakfast every week, and we discuss a wide range of things.

And our staffs are always in contact. We have a markets room, they have a markets room. But specifically, did we discuss some kind of a break the glass?

I think we're a long way from that. So when was the last time you guys spoke? You had breakfast last week? We had breakfast last week, and it was an away game. I was over at the Fed. And no concern so far from the Fed chair on what he saw in the Treasury market? I think we would have heard from the Fed chair. I think we heard from Governor Collins of Boston on Friday. We heard from...

Governor Weller today on his thoughts on what tariffs mean. So it seems like business as usual. When it comes to the Fed chair, his term is up May 2026. So we're almost 12 months out from that. When are you going to start to think about having discussions with the president about who should lead the Fed? Well, we think about it all the time. I think when are we going to start the discussion?

interviewing candidates, and that'll be sometime in the fall. In the fall, so about six months lead time. The U.S. Supreme Court recently came out with a ruling that the executive branch the president for now could oust top officials at independent agencies. And that has some individuals in the market a little bit concerned about what this could mean for the independence of the Fed, which is really a cherished pillar of wanting to invest in America.

Do you have any concern about potentially President Trump ousting Fed Chair Jay Powell or the independence of the Fed?

repeatedly said the Fed has two duties. And I believe that monetary policy is a jewel box that's got to be preserved. And then they have regulatory policies. And I think we can have more of a discussion because the Fed is one among three bank regulators. There's the Fed, controller of the currency, and the FDIC. So I think it's very easy to

to delineate between those two. - So at the moment, no concern? - No concern.

When you talk to Fed Chair Jay Powell, at the moment it doesn't sound like they feel like they need to step in on this unraveling we saw last week with the bond market. Does the Treasury have any plans to do something if this was to become more unnerving? Well, look, the Treasury has lots of things we can do. But again, I think we're a long way from that. But all options would be on the table? Sure.

But again, we have a big toolkit that we can roll out. We do regular off-the-run buybacks. We could up

the buybacks if we wanted. Just finally, I want to get your thoughts on something you told me, John and Lisa, in February, which was that in your old world, you would be that person with your ear against the door trying to understand what policymakers were doing so then you could predict where financial markets would go.

In this moment where we hear from top executives constantly, today it was the Goldman Sachs CEO, last week it was J.B. Diamond, and there's uncertainty, especially around tariff policy. What advice would you be giving to your old self? To look at the whole policy because, again, not you, but others in the media can pick one factor. So right now it's tariff, tariff, tariff. But we have

You mentioned we have tax, tax, tax coming up. We have deregulation, deregulation, deregulation. So it's a mini leg stool. And I would try to think about what's happening. The tariff sequencing was always going to be first. The tax bill is going very well.

I think I've been pleasantly surprised at how quickly that's moving along. And then deregulation from our area on the financial side and in the rest of the economy, that takes a little longer, but that will start kicking in September, October, in the fall. And those are going to be very powerful. I believe you described as a three-leg tool. And right now, everyone is focused on one part of that leg, and that's the tariffs, as you say. When it comes to the tax cuts,

Right now, what the market is expecting and what could get done in Congress based on how slim the majority is for the Republicans is just an extension of current policy. I think that's wrong. I think that the underreported story in the media, the story this funder report doesn't get reported enough is a Democratic chaos, but that the underreported story is the

remarkable Republican unity led by President Trump. Speaker Johnson, on first try, got instructions out of the House for the budget. He passed a clean CR first try. Leader Thune pinged it back to the House very quickly with their instructions and

I had something along with Kevin Hassett, had an NEC chair called the Big Six, which also includes Leader Thune, Speaker Johnson, Senator Crapo, Committee Chair Jason Smith. And everyone's very aligned. And there are going to be a lot more bells and whistles other than in T.C.

other than just changing the date on TCJA. So your pitch right now to financial market participants, to consumers, is you need to see the entire picture. Well, you need to see the entire picture and

As President Trump said the other day, stay cool. It was my message when I was out with you on April 2nd. It was to the countries. These are maximum rates. So you ask if it was a maximal strategy. If you don't elevate, this is your maximum rate. So don't elevate. You have in markets the upside barrier. You don't have unlimited risk.

and then come to us and we will negotiate in good faith. - Can you guarantee clarity in 90 days?

I think clarity is through the eye of the beholder, but I can guarantee you that we're going to run a robust process, and I think the market can take great comfort in that. So maybe some of that uncertainty starting to evaporate. Yeah, if we measure uncertainty by the VIX, I think that the VIX, I don't want to make market calls, but I think that the VIX spiked and is likely peaked.

Secretary Bessant, we really appreciate your time. Of course, that was Scott Bessant, the U.S. Treasury Secretary here in Buenos Aires, and his pitch to the world. It's a three-legged stool in terms of Trump administration's policy proposals. Right now, the market is squarely focused on tariffs.

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