Scott Bessent may have the unhappiest job in Washington, D.C. As President Trump's Treasury secretary, he's a point man in Trump’s damaging trade war with China and many other trading partners. But he's also Trump's liaison to Wall Street and the investing community, with the mission to soothe markets roiled by Trump's tariffs and the president's seeming indifference toward the recession he may be causing.
Bessent's message is everybody calm down. In an April 15 interview with Yahoo Finance, Bessent suggested that Trump's tariffs were getting outsized attention while markets were overlooking positive developments relating to deregulation and tax-cut legislation coming later this year.
"The news cycle, for whatever reason, is focused on tariff policy," Bessent said in the interview. "The Trump economic policy that I'm part of ... is really a three-legged stool. Tariffs are getting the majority of the publicity now. But we're having very good luck ... very good progress [on the other things]."
Bessent also said much of the confusion surrounding Trump's trade policy will lift by summer. "We're going to have a lot more clarity on the way forward [on tariffs] over the next 90 days," he said.
That's not calming anybody down. CEOs would certainly welcome clarity, given that it's nearly impossible to plan business investments with on-and-off-and-on-again tariffs that could leave costs higher or lower or somewhere in between. But clarity might simply cement the bad news that markets are now prudently pricing in.
The state of play in Trump's trade war is that Trump has imposed a lot of tariffs on most US trading partners, removed some of them in response to plunging markets, and focused the whole blitz largely on China. The totality of his trade moves includes a "baseline" 10% tariff on most imports to the United States; higher tariffs on imported autos, steel, and aluminum; and a gargantuan 145% tariff on Chinese imports. The China tariff is so high that it's practically an embargo, so Trump announced an exclusion for products such as electronics that account for about 20% of Chinese imports.
The once-mighty US stock market is down nearly 10% this year as investors try to get their brains around Trump's maddening and haphazard trade policy. Bessent and Trump say they hope to negotiate trade deals with some nations that will neutralize the negative impacts of tariffs. But that does not include China or Europe, and investors think Trump's tariff endgame will be a net negative for American companies and the US economy.
Trump's protectionism has pushed the average tax on some $3 trillion worth of imports from a very low 2.5% at the start of the year to around 27%. That's something like an $800 billion tax hike on American businesses and consumers. Most Americans haven't felt it yet because importers stocked up on goods in the first quarter, knowing the tariffs were coming. But if the tariffs stay in place for a few months or longer, Americans will see shocking price hikes for cars, clothes, appliances, handbags, and many other everyday things. Those price hikes will hit right around the back-to-school shopping season in late summer.
There's no way around the hit to corporate earnings, which in turn will depress corporate spending and hiring. Goldman Sachs estimates that every five percentage point rise in the average tariff rate reduces S&P 500 (^GSPC) earnings by 1% to 2%. So, a hike of 25 points — the Trump tariffs — would reduce corporate earnings by 5% to 10%. Stocks are down this year because Trump's policies will directly lower corporate profits and bring all the unwanted consequences that come with an earnings shock.
Bessent promises clarity — but not relief. If Trump has a coherent trade strategy meant to bring a net gain to the US economy, nobody in his administration is explaining what it is. Instead, Trump talks about "medicine" for an economy that didn't need it and acts as if a trade war will be worth it because it will hurt others more than it hurts us. But it will still harm the patient!
Bessent's "clarity" apparently relates to 14 or so US trading partners, including big economies such as Japan, South Korea, India, Australia, and the UK. "We're in rapid motion," Bessent told Yahoo Finance. "In 90 days ... we could have substantial clarity on those 14." The implication is that Trump will make trade deals with those countries that avoid high tariffs.
That could be good news. But it could also be bad news that Bessent does not foresee deals with China or with Europe, leaving those trade wars to escalate and hang over business and consumer spending decisions for months or years to come. Then there's additional damage to US exporters from retaliatory measures such as those China has already imposed and that Europe will assuredly roll out if or when Trump unpauses his double-digit "reciprocal" tariffs on many European countries.
Treasury Secretary Scott Bessent speaks to reporters outside the West Wing of the White House, Wednesday, April 9, 2025, in Washington. (AP Photo/Evan Vucci) ·ASSOCIATED PRESS
The other two legs of the Trump stool, deregulation and tax cuts, are business-friendly in theory. But they are also likely to have a marginal effect on the economy compared with Trump's tariff actions.
Trump is slashing regulation by executive order, which, in many instances, he has the authority to do. But he's also exceeding his authority in some areas, with courts forcing him to backpedal. Businesses only benefit from deregulation once they know the relief is legal and durable, and Trump's chaotic style doesn't always achieve that. "Multiple regulatory changes initiated by the Trump administration could create uncertainties which make project developers and financial investors leery of undertaking significant new investments," ClearView Energy Partners explained in an April 16 analysis.
Tariffs can even negate the benefits of deregulation. Trump is aggressively easing the rules on oil and gas drillers, for instance, leaving fewer barriers to things like getting permits to build pipelines. But Trump's tariffs are pushing up the cost of materials used to build pipelines and other equipment. Plus, global worries about slowing growth and a recession have pushed oil prices close to $60 per barrel, which is around the breakeven point for many US drillers. Even with easier permitting, they won't drill more if it's harder to turn a profit.
Trump's tax cuts may not provide much of a boost, either. The vast portion of Trump's tax-cut agenda is an extension of the ones that were due to expire at the end of 2025. Analysts have broadly expected Congress to renew them, and no Wall Street forecasters have made an expiration of those tax cuts their baseline scenario. So, most of the Trump tax cuts will merely be an extension of the status quo. They won't do anything new to offset the higher costs of new import taxes or the hit to bottom lines those will cause.
Bessent's three-legged stool is actually very unstable, with one leg, tariffs, longer than the other two, making the whole thing defective. If Bessent could cut the tariff leg to the same length as the other two, markets and investors would feel better. But his boss, Trump, seems to revel in keeping everybody off-balance, and no message man can overcome Trump's own actions.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
