TREASURY SECRETARY BESSENT INTERVIEW

Transcript

SPEAKER_01 0:00

quite a speech last night and I don't know w whether you have helped or whether it's all you, but it was I thought it was very eloquent and building on some things that I think you've tr you've touched on in other settings. I think at at other I think in Dallas you talked about, maybe at the Reagan Library. But I think as we are celebrating this 250 years of of the greatest nation on earth we need to s just I think reflect on how we we continue to do what our founders wanted to do in a totally different world with with different challenges. And and I think your words were the disciplined use of America's economic power in service of our sovereignty. And I think that I think that I'm going to remember that I'm going to put that to memory because I think it it's very statesmanlike.

SPEAKER_00 0:51

Well Joe it's the and again thank you for having me it's exactly what President Trump is implementing in this historic second term. And as we have the 250th this year it's a good idea to reflect and President Trump has reawakened and made us all aware and our allies and and our enemies that the U.S. has both military might but we have economic might and for a long time our economic might was not only was it challenged it was taken for granted and it was abused and now we are saying that for our allies come along with us here are the rules of the road we want reciprocity and engaging and saying like it is a new system but old values I I think is perfectly appropriate. And you know President Trump has set the stage for this when we look at what happened in Iran that you think about it we had maximum pressure then we had epic fury then we had economic fury and then we had the blockade and that's how we got the Iranians to the negotiating table.

SPEAKER_01 2:03

And just looking over your remarks I what I was struck by and I think we can since we have time we can make the case that that times are different in terms of post-war United States where we we almost could afford to to be taken advantage of by the rest of the world because we we were so dominant. But but things changed and and and those old those old habits turned into things that actually hurt our country and hollowed out the core and and and we're still dealing with that now.

SPEAKER_00 2:36

Well it it's what was it was in our interest to rebuild our allies to defend against communism in the post-World War II era and I think that our interests strayed from our economic policies our economic policies strayed from our interest that over the past couple of decades and President Trump has just called for a rethink and we have all hands on deck in the administration whether it is our foreign policy our economic policy and our military policy and everyone wants to be part of the U.S. economy we're the world's largest consumer we're the world's great innovator and you know I I'm responsible with our dialogue with China and I try to put myself in my Chinese counterpart's seat and when they look at the United States the uh what do they revere in the United States? First of all we're a great military we we've seen that in the past year our economy and the strength of the dollar that our energy independence and our energy dominance the and the our innovation no one has innovation like this. I got a question last night it's also the 250th anniversary of Adam Smith's The Wealth of Nations and Adam Smith couldn't have imagined what the United States would have unleashed by the letting people innovate the form their own businesses and live in a free society when you unleash human potential like only the United States has look look what we've done. We should be proud of this in our 250th year.

SPEAKER_01 4:10

I wonder what it would cost to to make a couple of thousand copies of that and pass it around in New York City did you see the the the results of of those elections last night?

SPEAKER_00 4:21

Well you know who predicted this early on was I was in the Oval Office meeting with President Trump when the mayor came in to scene and he said you're the leader of the Democratic Party now and that was months ago and you know last I wouldn't have believed it but it after last night I won't last night we saw the uh mayor mandami is the leader of the Democratic Party and the the establishment Democrats finally we are seeing where the Democrats are going in in this election and it will be a very uh stark choice between Republican parties and the it's not the fringe Democratic left anymore it's the mainstream of the Democratic Party do you think happens I mean I these people probably win in New York for all I know I'm from New Jersey but the can you take this message national? We we'll see seems to be seems to be playing in Maine seems seems to be playing in in Michigan seems to be so again if this is the way the Democratic Party wants to go and it seems to be more power to them because we are going to offer a stark contrast you know do you do you want to keep more of your money? Do you want to have the or do you want to have the state takeover? And you know what we can't get is an answer. Where's this ever worked before Joe? That you know as as we see the you know the regimes collapsing in Venezuela, the regimes collapsing in Cuba, uh where's this ever worked? I I can't get an example. I'm an economic historian.

SPEAKER_01 5:47

You you uh divided I guess what um what what you think the way to approach things are into into five categories that that you went over last night. I think given the background that we just talked about with how we have been taken advantage of in your view and in the president's view I think these first two things are national capacity obviously we need to make things here and then the second is reciprocity and both of those play into the whole idea of tariffs and I don't know if Hamilton would have been in favor of the Hamilton was the earliest tariff man.

SPEAKER_00 6:22

He he was in favor of tariffs for several reasons. He wanted to protect the nascent industry of the United States of America as we built capacity to compete especially with the Brits and he also wanted to fund the Treasury. So Alexander Hamilton was the original tariff man. But I guess when what year do you think it became uh uh just such a terrible word? Look I I I'm not sure when it did there there were great tariff fights you know during the the McKinley era but the ter tariffs had worked very very well and then you know the income tax came in at a very low level and then the income tax just kept getting ratcheted up. We had an income tax in the United States right after the Civil War and it was to pay down the United States debt but we paid down the debt and then the income tax went away came back the right after World War I.

SPEAKER_01 7:15

Okay so so tariffs at this point obviously have in your view have been de minimis in in adding to the the structural inflation that we have or or worth it or or how would you characterize it?

SPEAKER_00 7:29

Look the the the data peop people like to say that it's added added to inflation but we look at the data the structural inflation has been in services and you you don't import the services and what we've seen the is in many of the goods the prices that have been paid by the producers we saw many of the Chinese producers some of the Chinese low-end clothing companies reduced their prices by more than 50 percent yeah and and at this point the the method to to use because of what happened with with with the Supreme Court? Yeah well well that was that was unfortunate the president used IEPO which was a very uh efficient way to put on tariffs we have rebooted the tariff program right now we have something called Section 122 tariffs which is a 10% global tariff uh currently USTR Ambassador Jamison Greer is doing studies for Section 301s and if those studies are successful and I have no reason to believe they won't be but we don't know until they are then the tariff rates are going to go back to exactly where they were I would say the good thing about having used IEPA in 2025 it allowed us very quickly to get to tariff deals or trade deals that we never would have gotten to before you know the the EU the EU is going to pay us 15% and they are going to charge us zero. So we have had a big they are rebalancing there so and they're bringing down their non-tariff trade barriers many many of their unfair financing practices and it's the same around the world whether it's Japan, Korea our allies you know whether it's China so I think it's been a big success at Treasury assuming that the 301 studies go through we think that there's going to be a a the minimus decline in tariff revenue in our projections for fiscal for calendar 2026.

SPEAKER_01 9:31

We should feel comfortable dictating a a lot of trade rules as the United States your third principle is that America's going to write the rules of the next economy. So we're gonna write the rules on on on trade we're gonna write the rules on AI do we have the right to do that I I think that you feel that we do and the president feels that we do.

SPEAKER_00 9:54

We don't want we don't want red communist China writing the rules I know well I I think we have the obligation to do it because we're the leader. We are the leader that I I was just accompanied the president to the the G7 meeting and it was the US tech companies who are by far in in the lead and still in China at this point, no doubt. Oh no no no doubt and China knows that and the the the nature of AI and the recursive learning of the models that once you get in the lead then the models they start working to train themselves and it's very difficult for anyone to catch you if you keep up that path. But I I think what's important here is we can't let other countries bog us down with regulations. You know we're seeing that globally U.S. is an energy superpower and then other countries are trying to use extraterritorial measures to say oh like you you have to get your NAT gas this way you've got to have a methane cap or something like that. And we can't do that in AI and we're not going to do it. We are the AI superpower China's next and you know France is a distant third yeah we shouldn't be shy about about forcing our will on the way things are done. Well or or or setting setting the global standards you know just as we set global standards the in many many industries and it's the standards you when when you look back at the uh cell phone industry and uh mobile data you know it's very important that you we use our standards uh 3G 4G 5G 6G because the country that sets the standards then has the advantage. So look for 6G we want to work with our allies and the form a Western alliance and again the U.S.

SPEAKER_01 11:47

wants to lead but we want to bring other countries along the I guess maybe this is one of the most important fourth principle that that you you outlined is financial leadership in terms of currency I think in terms of the dollar and I don't that people haven't seen perhaps the rebound in the dollar in in recent months has kind of has gone unnoticed because the demise was greatly exaggerated. I think we have a chart where we can we we can look at that. It might not be for all the right reasons higher interest rates et cetera but but dollar dominance is essential?

SPEAKER_00 12:20

Well dollar dominance is essential and everything President Trump is doing here is you know if you look the the the new Venezuela is going to is invoicing in dollars they're coming back onto the dollar system they've been sanctioned they were not allowed to translate or to transact in dollars and now the dollar is going to be the centerpiece of their trade you know they were selling discounted oil to China and not getting dollars. We're seeing in the Iranian negotiations the Iranians will be invoicing in dollars so everything we are doing is pushing the dollar the back it's never left as the centerpiece for the global currency system but we're reinforcing it you know I would anticipate when the Russia Ukraine uh conflict ends that Russia will want to come back in the dollar system because again you know the the dollar it's our liquidity it's our capital markets it's the depth and breadth everyone wants to be here and I I think many times you know the great great thing about the United States is we we course correct when we go too far one way or the other and I think we should not be the shy about flexing where we have advantages and where we have advantages share with our allies and push back the uh on those who the uh are are not aligned with us.

SPEAKER_01 13:49

You need to I guess convince certain people that that after 40 years of not being able to sell oil for dollars that that's finally going to happen. I'm sure that was that was something that that you either signed off on or came up with. But before we do I think the president we're talking about Iran he just posted something on True Social. Iran has informed the U.S. that uh despite troublemaking fake news uh reporting to the contrary there are no tolls no insurance costs and no other charges of any kind being sought or received by Iran on ships traveling the Strait of Hormuz if this is false information negotiations would end immediately. Additionally no money has been given to Iran or released from their money to them by the U.S. We will be releasing some of their money that is totally controlled by us to our farmers and ranchers for the purchase of corn, wheat, soybeans and more food is desperately needed in Iran and we will be purchasing it for them exclusively from the United States. Thanks for your attention uh to this matter Donald J.

SPEAKER_00 14:51

Trump well I I think that's a very very important statement for the American people to understand. So any any money that the Iranians get first is going to be used for the benefit of the Iranian people. It is going to be Iranian frozen funds and the U.S. Treasury will have people sitting the initial money will likely be released from a Qatar U.S. Treasury will have people sitting in Doha overseeing that how the money is allocated and a very large percent of it will go to buy uh U.S. foodstuffs and medicines so we will be recycling the money back into U.S. products but it will be overseen by Treasury the uh in the Middle East at this point I mean would would you say that that the president's pragmatic approach to to ending this is it an off-ramp?

SPEAKER_01 15:44

Did did we accomplish everything we we needed to accomplish in your view?

SPEAKER_00 15:48

Yeah look I I think we didn't have regime change but we've changed the regime and that's what took a long time in terms of getting to the negotiations the the the actual fighting uh which which our military destroyed their air force destroyed their Navy destroyed a large part of their missile stockpile but more importantly destroyed eighty or eighty five percent of their missile producing capabilities so we've done that but Joe what took a long time was finding people to negotiate with. If you think about the Iranian power structure you know it it's three it's three different groups it's the elected officials on one side the IRGC in the middle and then the clerics on the other and those were decapitated at the first level some at the second level and now we are down at the third level and what President Trump has done with the combination of epic fury economic fury and the blockade for the first time ever for the first time since 1979 the Iranians are willing to discuss their nuclear program never happened before.

SPEAKER_01 16:54

Treasury Secretaries love strong dollars obviously we've never I don't think we've ever had one that that that would ever say they'd like a weaker what what we love is doing the right things to make the dollar strong so we want certainty.

SPEAKER_00 17:08

We have great tax certainty thanks to the working families tax cut also known as the one big beautiful bill we have regulatory certainty thanks to President Trump's deregulatory the regime and originally he told the cabinet for every one new regulation you've got to take out 10. I think we've taken out a hundred so great regulatory certainty and the U.S. is the only manufacturing location in the world that can provide great energy certainty because now they are where they are the leading energy producer and exporter in the world.

SPEAKER_01 17:39

I guess I was getting to in a backward way to Kevin Borsh dollar stability seems to be very very important to him but dollar stability could mean higher interest rates for longer I would think and I'm wondering how that plays into President Trump's desire for lower rates.

SPEAKER_00 17:58

Again you can you can have a strong dollar when rates are being cut because the U.S. economy is accelerating you can have a strong dollar because their the rate interest rate differential is high but mostly I think we're going to have a strong dollar because our economy is pulling away from the rest of the world. Look at the way our economy has performed during the Iranian conflict you know the the the rest of the world the has gone negative to zero plus or minus the point something percent and the U.S. economy that because we went into this on very strong energy footing that on very strong uh capex cycle from both the AI and the tax bill the U.S. economy has really performed and we're gonna get to the other side of this conflict as you were you were just showing energy prices are coming down inflation's gonna drop and the economy I think is going to be accelerating on a non-inflationary basis the uh for the rest of the year and for the rest of the President's term.

SPEAKER_01 18:57

I think maybe in in in light of of what we're seeing in polls and and elsewhere about Americans continuing to have affordability concerns the fifth and most important thing that you outlined last night was that all of this, there's one goal in all of this and that is to have the average American participate in in all this prosperity.

SPEAKER_00 19:20

Look that this is what happened you know we had the China shock and the American manufacturing base was decimated and we're we are trying to bring that back and we've got to make sure that these policies work for everyone not just like the coastal elite not everyone within 10 miles of here because you know what what happened was a lot of the economic growth the was not evenly distributed. President Trump's first term hourly workers did better than managerial workers the bottom 50% of households did better than the top 10% and I think we're gonna get back to that. Before the Iran conflict we had had real wage growth every month up until April and I think we're gonna be back in that cadence and look you know we we understand that the Biden administration torched affordability worst inflation in 50 years 21.5% increase in the price level and that is still smarting and we are working every day to try to bring that down.

SPEAKER_01 20:29

Do you think that the the recent uh rebound that we've we've seen in some in prices PPI and CPI even even on the on the core is that seeping in from from $95 oil is that what did it or are there still are there still structural things in the economy and I'm not necessarily saying tariffs, but uh perhaps tariffs that are causing it to be well above the Fed's target. We've been above the Fed's target for for how long? For years. Well of two percent.

SPEAKER_00 20:58

Look I I in f in February I thought that we would be very close to the Fed's target by middle of the summer September September. And and look the the Fed thought that also the Fed thought that also because we we had rate cuts the at the end of last year the the dot projections which the are you glad Wars won't do dot projections I I don't think anyone should do dot projections. The only reason I ever liked the dots was when I had my investment business we had a trading model that actually traded against the dots because the dots are always wrong that the the Fed board and their participants who do the dots they they kind of get worked up. It's groupthink they move one way the dots start pricing in a lot then you can trade against that then they move another way and you can trade against that so that's the only good thing about the dots that I I do uh applaud Chair Warsh's getting rid of forward guidance. I I think that that is kind of a crutch That market participants have started leaning on.

SPEAKER_01 22:03

How much interaction should you have with Kevin Warsh at this point? Should you have lunch every week?

SPEAKER_00 22:09

Is that is that a week? We we have breakfast every week. I did the same with Chair Powell. I think we had 41 breakfasts. And look, it is important for the U.S. Treasury and the Federal Reserve to discuss ideas, to discuss policy changes, where where do we see the economy going, where do we see regulation going? And what what do we think are the the challenges?

SPEAKER_01 22:32

Do you think that productivity and and gains from whether you think it's it's the president's policies, whether you think it's AI, you think it's going to be a different world, a world where uh uh an economy can run hot? We just lost Alan Greenspan, and and there's a lot of comparisons to to the way that that that Chair Wars should should be managing things based on on letting an economy run hot and still having lower interest rate.

SPEAKER_00 23:01

Well, I I wouldn't call it let it letting the economy run hot, because that connotation is that inflation is running hot. Okay, not I think the strong a high good GDP. I I think we can have a high GDP economy the uh without the traditional uh inflation seeping in. And uh as over the past few days, we read the obituaries on Alan Greenspan. He had the foresight that in in the 90s productivity was about 1.5 percent or leading into the 90s, he saw that the office modernization and the internet could be a boom for non-inflationary growth. And he let the economy the uh you know I I think that there was in early 97 there was one tap on the brakes rate hike. But other than that, we had the longest sustained growth period in history, and I think there's a very good chance that we could see that again.

SPEAKER_01 23:54

But is there at this point still an underlying inflation rate that the the Fed needs to be concerned with? Would you expect it rate cuts this year or or even next year, given that we we're nowhere near 2 percent?

SPEAKER_00 24:05

Again, I I'm not gonna comment on that, but what I think is that we do need to have an open mind on the price or the inflation impact of the Iran conflict. And let's see what inflation looks like on the other side of this. And then we have an open mind that uh the the AI boom could up productivity and be disinflationary, get us back down to target. What I am confident is that Kevin Walsh will do what will take the best path to satisfy both the inflation mandate and the growth mandate. And look, he came out tough talk talking about the uh inflation. A lot about prices.

SPEAKER_01 24:47

I mean, if you had I mean you probably won't share with with me, but have you had conversations with the president that maybe it's not the right time to cut rates?

SPEAKER_00 24:57

The the the president that has said both in public and privately that he has every confidence in Kevin Warsh. That that's why he chose him. Because he, you know, at the uh Chair Walsh is swearing in, and then recently that I think we were getting off the airplane in France, and the the president said, I want him to do what's best. That's why I chose him.

SPEAKER_01 25:20

You're 3-3-3. Can't go into that again. It we were making some progress again. You know, you have a lot of the fighter goes into the ring with a great plan until he gets hit in the face. I guess I mean the the Iran war, did it change your your view on how we can we can get debt as a percentage of GDP?

SPEAKER_00 25:40

No, so so three through three, the the three components were we could have three percent growth. I I think we might have been growing at four in February. I think we're gonna get backed and we can have something with a three in front of it this year. As I said, the underlying economy has been strong. The other one of the other threes is three million more barrel a day equivalents, so crude and net gas, export LNG, which we're well on our way to. We've never produced so much energy, never exported so much. And then deficit to GDP of 3%. What we didn't get any credit for in 2025 was we had a fiscal contraction. So when we came in 2024, deficit to GDP was about 6.8%. Democrats, as they always do, blew out spending in the fourth quarter to unsuccessfully get Vice President Harris elected. So that was the highest when we haven't had a recession, haven't been at war 6.8. We brought it down to 5.5, 5.4 for calendar year 2025. And I don't know if we're going to make progress this year, but I think by the end of the president's term, we can be at something that looks like it could have a three in front of it. And what's important about that, that's when you start paying down overall debt as a percent of the economy.

SPEAKER_01 27:03

Do Trump accounts play into uh it may it might not be under the president's administration where it finally starts to benefit the the average American, but is that part of of having everyone in this country participate in in the greatness of of uh of the United States?

SPEAKER_00 27:18

Yeah, uh Joe, 38 percent of the American public has or American households have no stake in our great equity market. That you know, may maybe they have jobs at the companies, but they don't participate in the stock appreciation. And I think the Trump accounts are one of the ways that are going to remedy that. So every every child under 18 can have one. Children who were born during this administration get a $1,000 uh seed investment from Treasury. But importantly, every every family should open one because we are also gonna see contributions. We've seen great philanthropists like Susan and Michael Dell. They're putting in $6.25 billion into the Trump accounts is gonna be uh distributed again to everyone in the uh up until age 18 across the country, as long as you're not in a 20% upper zip code. So the bottom 80% of zip code by earners are the children are gonna get $250 from the Dells, and we're we are seeing other philanthropists uh pay into those accounts. We're seeing foundations who want to pay in, we're seeing some of the states are gonna contribute, and it's gonna be a new corporate perk. So and and families can put in up to $5,000. And I think this is gonna be a game changer. Uh what what we saw yesterday in New York is a disillusionment with the system. We bring more people into the system.