Explaining Treasury Secretary Scott Bessent's Economic Views in Simple Terms

On January 28, 2025, Scott Bessent was sworn in as the 79th Secretary of the Treasury of the United States. Based on his interview, here's a breakdown of his key economic positions in everyday language that anyone can understand.

Get to know Scott Bessent more here: https://home.treasury.gov/about/general-information/officials/scott-bessent

1.Why Tariffs Matter

What was said: "Tariffs are necessary for the level of imbalances that we have."

In simple terms: The US buys much more from other countries than they buy from us. This creates an unfair situation. Some countries put barriers against US products, manipulate their currencies, or heavily subsidize their industries. Tariffs (taxes on imported goods) are one of Bessent's and Trump's favorite tools to push for more balanced trade.

According to Secretary Bessent, "Tariff" is President Trump's number one favorite word, with "Reciprocal" being his second favorite. On April 2nd, the administration will present their trade terms to international trading partners. They will identify which countries are treating American workers fairly and which ones are putting up unfair barriers against US products. These countries have two choices: they can either trade with the US without barriers, or face heavy tariffs on their goods. These tariffs would both collect significant revenue for the United States and help make international trade more balanced and fair for American workers.

2. Will Tariffs Make Everything More Expensive?

What was said: "Tariffs are just one-time price adjustment."

In simple terms: Secretary Bessent claims that tariffs will only cause a temporary price increase, not ongoing inflation. He points to falling energy prices (down 15% since inauguration), lower 10-year rates, decreased mortgage rates, and increased mortgage applications as evidence that other policies are fighting inflation. He also argues that even if prices rise slightly, bringing more jobs back to America will offset this pain.

3. Moving from Government Spending to Private Spending

What was said: "There will be adjustments from public spending to private spending...there will be a detox period."

In simple terms: The richest 10% consume over 50% of everything. The administration wants to reduce government spending and interest rates. This shift will be painful at first as the economy adjusts to less government money flowing through it.

This is the most bearish comment from the interview so buckle up for some pain.

4. US Funding of Ukraine

What was said: "US spent so much money supporting Ukraine War. Most European countries don't fund this war enough."

In simple terms: According to Secretary Bessent, President Trump achieved what 5 previous presidents could not do. The administration has successfully pushed European countries to increase their defense spending and take more responsibility for Ukraine's security. European nations have now agreed to provide more troops on the ground as a security guarantee to Ukraine, reducing America's financial burden in the conflict. This diplomatic breakthrough means European allies will finally pay what Bessent considers their fair share of the defense costs.

5. Is Trump Trying to Weaken the Dollar?

What was said: "There is no change for a strong dollar policy."

In simple terms: The adminstration is not actively trying to weaken the dollar. You should ask "Is the dollar strong because of US fundamentals?" We are against currency manipulation. Bessent opposes when other countries artificially weaken their currencies to make their exports cheaper compared to American goods.

6. The Stock Market Isn't Trump's Main Focus

What was said: "There is no Trump's put!!! ... Trump's KPI is not about the stock market, but people in the real sector."

In simple terms: According to Secretary Bessent, unlike his first term, President Trump is not measuring his success by stock market performance. Instead, he's focusing on the "real economy" where regular people work. Secretary Bessent points out that despite the stock market being up 20%, Democrats lost the election because everyday Americans weren't feeling these benefits in their daily lives.

Bessent also addressed the decline in merger and acquisition (M&A) activity, clarifying that "MAGA does not stand for making M&A great again." However, he expressed optimism that with deregulation and a more thoughtful approach from the Federal Trade Commission (FTC), business deal activity would naturally increase again. This reinforces the administration's focus on broader economic measures rather than just Wall Street performance metrics.

7. Bitcoin as a National Reserve

What was said: "Not going to buy Bitcoin outright using taxpayer dollars, but will do it in a revenue neutral way."

In simple terms: The administration wants America to lead in crypto, but won't spend taxpayer money buying Bitcoin. Their first step is simply to stop selling government-owned Bitcoin. Future steps remain undefined.

8. IRS Staffing and DOGE

What was said: "DOGE is going to cut about 45,000 workers (50% of 90K)."

In simple term: The Department of Government Efficiency (DOGE) plans to cut the IRS workforce by half (50% of 90,000 workers). Secretary Bessent argues that with 90% of tax filings happening online and the rise of AI, fewer human workers are needed to process and audit tax returns.

Can't think of a better application of AI than auditing tax returns. Do you agree?

9. Economic Relationship with China

What was said: "China is the most imbalanced economy. People who don't understand economics don't understand that the country with huge trade surplus will have the most problems in the trade war."

In simple terms: The US has allowed China to sell massive amounts of goods to America, which has hurt US manufacturing and wages. China controls 85% of critical mineral processing and uses predatory pricing to eliminate Western competition. Bessent believes tariffs will force China to trade more fairly and that China would suffer more than the US in a trade war. He also believes that President Xi won't invade Taiwan during Trump's presidency.