Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I'm pleased to be with Treasury Secretary Scott Bessett this time.
Speaker 2: You're back on Bloomberg in Argentina. Thanks for joining us again.
Speaker 1: Good good to be with you, Good to be in
Speaker 1: Buenos Aires.
Speaker 2: Yeah, it's fantastic here. So you've come here at a
Speaker 2: time when the IMF has just announced this twenty billion
Speaker 2: dollar agreement with Argentina. But we haven't seen a Treasury
Speaker 2: secretary come to Argentina since Trump's first administration, and that
Speaker 2: was for G twenty. So why the emphasis from the
Speaker 2: Trump administration on Argentina.
Speaker 3: Well, and Marie, a couple of reasons. The reason for
Speaker 3: being here today is today's a Fulcrum day. So the
Speaker 3: Melee administration has done three adjustments and this marks the
Speaker 3: beginning of the third one. So they did a large
Speaker 3: fiscal adjustment, a large monetary adjustment, and they're doing or
Speaker 3: they announced on Friday, or large currency adjustment has allocated
Speaker 3: twenty billion to them. The World Bank has allocated twelve billion.
Speaker 3: And I wanted to come here today to show support
Speaker 3: for President Melee and his commitment.
Speaker 1: Two.
Speaker 3: What I think is historic in terms of bringing Argentina
Speaker 3: back from the precipice.
Speaker 2: When it comes to the trade negotiations, I'm sure you
Speaker 2: spoke with President Milay about the ten percent rate that
Speaker 2: Argentina was hit with. Do you think at some point
Speaker 2: that can come down to zero?
Speaker 3: Look, I think we're going to start the negotiations and
Speaker 3: just like with everyone else, I'm telling them, bring your
Speaker 3: a game, we'll see what you got and we'll go
Speaker 3: from there.
Speaker 2: Can any country go to zero again?
Speaker 1: We'll see.
Speaker 3: Is I don't know what's going to happen with the
Speaker 3: negotiations because we've got a whole box of things. We've
Speaker 3: got to overcome tariff, non tariff trade barriers, currency manipulation,
Speaker 3: and sub subsidization of labor and facilities. So there's a
Speaker 3: big menu there.
Speaker 2: There's been an early focus on Latin America writ large
Speaker 2: from the Trump administration in the first one hundred days.
Speaker 2: Is Latin America policy also in a sense China policy
Speaker 2: for this administration.
Speaker 3: Well, I think that might be a good description because
Speaker 3: what we are trying to keep from happening is what
Speaker 3: has happened on the African content where China has signed
Speaker 3: a number of these rapacious deals marked as AID, where
Speaker 3: they are really they've taken mineral rights. They've added huge
Speaker 3: amounts of debts onto these countries' balance sheets. It's undisclosed
Speaker 3: to any of the other international organizations. They've got tolling arrangements,
Speaker 3: so they're guaranteeing that future generations are going to be
Speaker 3: the poor and without resources, and we don't want that
Speaker 3: to happen any more than already has a Latin America.
Speaker 2: China has a foreign exchange swap with Argentina. Would you
Speaker 2: consider a credit line directly from the United States.
Speaker 3: That's not under consideration in terms of so they have
Speaker 3: an eighteen billion dollar credit swap in r and b
Speaker 3: Argentina under the previous peronas government drew down five billion,
Speaker 3: and that will remain outstanding. The Chinese showed very good
Speaker 3: faith effort after the announcement or in conjunction with the
Speaker 3: IMF announcement, so that is going to be rolled forward
Speaker 3: for a year.
Speaker 2: But do you want them to get rid of that
Speaker 2: swap with Beijing?
Speaker 3: Well, I think as this administration continues stay the course
Speaker 3: of their economic policies, they should eventually have enough foreign
Speaker 3: exchange inflows to be able to pay that off.
Speaker 2: So less than two weeks ago, you and I were
Speaker 2: talking outside of the White House after what President called
Speaker 2: Liberation Day, and you said you weren't part of the negotiations.
Speaker 2: Now you're leading them. What's changed in these past twelve days.
Speaker 1: No, no, no, no.
Speaker 3: What I said was I didn't construct the actual rate,
Speaker 3: the teriff rates. I've always been part of the tariff policy.
Speaker 3: I had been focusing on tax maybe I want to
Speaker 3: talk about that later. That's going very well, and now
Speaker 3: with the trade negotiations, I'm going to be part of that.
Speaker 3: And the President has hit a ninety day pause button,
Speaker 3: and we are moving quickly with many of our most
Speaker 3: important trading partners. So we had Vietnam in last week,
Speaker 3: we have Japanese in on Wednesday, South Korea next week,
Speaker 3: so it's.
Speaker 1: Going to move fast.
Speaker 3: But the important thing for your viewers to know is
Speaker 3: we're sending up a process and we are going to
Speaker 3: run that process. It's going to be orderly and at
Speaker 3: the end of the day, especially for the most important
Speaker 3: trading partners, the President's going to be involved.
Speaker 2: So when it comes to the current negotiations this week,
Speaker 2: you're also sitting down again with the Spanish negotiating team.
Speaker 2: This excuse me, the Japanese negotiating team and also the
Speaker 2: Spanish economy minister.
Speaker 3: Well, the Spanish economics minister was just a pre arranged meeting.
Speaker 3: He and I have never met, so that is not
Speaker 3: a trade sit down. The Japanese meeting is a trade negotiation.
Speaker 2: The Japanese Prime Minister recently said he's not going to
Speaker 2: rush to get a compromise in a negotiation. How quickly
Speaker 2: do you think you can see these deals come to fruition?
Speaker 3: Well, again, I think there will be advantage to our allies,
Speaker 3: especially in a first mover advantage. You usually the first
Speaker 3: person that makes the deal gets the best deal.
Speaker 1: So if you think will be first, it's their choice.
Speaker 2: Is there a handful of countries that you expect to
Speaker 2: have a deal before the ninety days is up.
Speaker 3: Oh, I think there could be numerous countries, and it
Speaker 3: may not be the actual trade document, but we will
Speaker 3: have an agreement in principle and be able to move
Speaker 3: forward from there.
Speaker 2: So we're talking about a dozen or seventy plus.
Speaker 1: I think it's going to depend.
Speaker 3: But we're going to move with all deliberate speed, and
Speaker 3: again it's going to be a process. It's going to
Speaker 3: be USTR, who just has mountains of data that they've
Speaker 3: been collecting over the years. Because, in a funny way,
Speaker 3: the terriffs are the easiest part. So a country with
Speaker 3: high tariffs you can just say, okay, this this, get
Speaker 3: rid of it. It's the non tariff trade barriers that
Speaker 3: are more insidious, more difficult spot and it's probably going
Speaker 3: to take a little longer to exercise those demons.
Speaker 2: When you said you weren't part of the rates in
Speaker 2: that chart that the President held in the Rose Garden,
Speaker 2: is he taking a maximist approach? Neil Dutterer recently wrote
Speaker 2: that President Donald Trump has cracked a lot of eggs,
Speaker 2: and now Scott Bessett's treasure secretary needs to make an omelet.
Speaker 2: Is that how you view this situation right now?
Speaker 3: I view not giving away negotiating secrets on worldwide television
Speaker 3: as the essence of negotiating.
Speaker 2: You recently talked about getting deals done quickly with partners
Speaker 2: to then confront China together. When you're in these negotiations
Speaker 2: with trading partners, are you looking for them to offer
Speaker 2: up something to combat Beijing?
Speaker 3: Well, I think combats an aggressive word. But look, I
Speaker 3: think now that we have had the China terriffs in place,
Speaker 3: that they are going to want to have some protection
Speaker 3: from Chinese goods flooding their markets. That China's business model
Speaker 3: is like from that Disney movie where the brooms are
Speaker 3: carrying the buckets, like they're not going to stop manufacturing
Speaker 3: because the US.
Speaker 1: Has a terriff wall up. So those goods are going
Speaker 1: to go somewhere.
Speaker 2: Where do you think they're going to dump?
Speaker 1: Well, I think it depends on the good.
Speaker 2: We have exemptions now though for electronics, so we still
Speaker 2: expect electronics to come into the United States with the
Speaker 2: smaller tariff rate, the fetanyl twenty percent.
Speaker 1: But you were asking where are they going to dump?
Speaker 3: I think it will depend on what is the good,
Speaker 3: higher value added manufacturing goods, likely the Europe, Canada in
Speaker 3: the G seven and then kind of more the bobbles
Speaker 3: and knickknacks in the Global South.
Speaker 2: China's Commerce ministry came out when the tarff rates were
Speaker 2: going above one hundred percent and called it, quote a joke.
Speaker 2: Has there been negotiations on any level between Beijing and
Speaker 2: Washington right now?
Speaker 3: Well, look it'll come from the top. President Trump, Chairman
Speaker 3: Shee have a very good relationship and I wouldn't say
Speaker 3: that these are not a joke.
Speaker 1: I mean, these are big numbers.
Speaker 3: I think no one thinks they're sustainable, wants them to
Speaker 3: remain here.
Speaker 1: But it's far from a joke.
Speaker 2: Well they just say that the rate is so high
Speaker 2: it's become a joke. Basically. Does it just stop trade
Speaker 2: between Washington and Beijing altogether? Do you see a decoupling
Speaker 2: of these two economies?
Speaker 3: Well, maybe the trade minister has a different sense of humor.
Speaker 3: I do, but I don't see anything funny about it.
Speaker 2: Do you see a decoupling though, between Washington and Beijing?
Speaker 1: There doesn't have to be. There could be.
Speaker 3: There's a big deal to be done at some point.
Speaker 3: But look what is different with China that is different
Speaker 3: in the history of trade that normally, if you go
Speaker 3: back to the big trade deals or the currency deals
Speaker 3: in the eighties Applausa Acord, Louver Accord, the Reagan Auto deals,
Speaker 3: our leading economic competitors were our military allies. China is
Speaker 3: both our biggest economic competitor and our biggest military rival.
Speaker 3: So that's going to require a special kind of formula.
Speaker 2: Are you teasing out a Mara Alago accord that we
Speaker 2: should be paying attention for in the future.
Speaker 1: I'm not sure what you're talking about.
Speaker 2: Oh, potentially getting all these trading partners together to discuss
Speaker 2: fair balance trade.
Speaker 1: Well, we're doing that over the next ninety days.
Speaker 2: Okay. So shifts in tariff policies has had markets on edge.
Speaker 2: Even the President recently remarked the bond market was quote queasy.
Speaker 2: Do you have a sense of who is dumping US assets?
Speaker 2: Who's been dumping US treasuries.
Speaker 1: I don't think there's a dumping.
Speaker 3: And I think we saw in the TIC data either
Speaker 3: today or Friday that actually foreign ownerships picked up.
Speaker 1: We had two, we had three big.
Speaker 3: Auctions last week, and on the longer end auction ten year,
Speaker 3: thirty year, we saw increase foreign competition. So I actually
Speaker 3: think this is one of those occasional varshocks that you
Speaker 3: get in the trading community. I think a lot of
Speaker 3: people got very leverage, maybe out over their skis, and
Speaker 3: then you combine that with some real money selling and
Speaker 3: you get these moves.
Speaker 2: So you don't think it's sovereigns. Potentially it's hedge funds unwinding.
Speaker 1: I have no evidence that it's sovereigns.
Speaker 3: And look emery not you, but The nature of journalism
Speaker 3: is to create a headline that ten days ago when
Speaker 3: tenure yields hit three ninety said, well, Secretary Besson got
Speaker 3: what he wanted, he got ten year yields down.
Speaker 1: But it's the wrong reason.
Speaker 3: Now, I forget what they hit on Friday, maybe for
Speaker 3: forty something.
Speaker 1: We saw a.
Speaker 2: Fifty basis move last week and ten year yield at
Speaker 2: the same time the dollar was weakening nearly three percent.
Speaker 2: How do you simultaneously look at that situation. It feels
Speaker 2: like investors are dumping US assets.
Speaker 3: Well, look, I've learned that not to look at what
Speaker 3: happens the over a week. I, for better or worse,
Speaker 3: have lived through a lot of these things in trading.
Speaker 3: In one's personal trading history is the scar tissue that
Speaker 3: sticks with you the most. I can tell you exactly
Speaker 3: where I was standing in nineteen ninety eight when the
Speaker 3: long term capital the bacle happened. That had nothing to
Speaker 3: do with anything other than a bunch of geniuses up
Speaker 3: in Greenwich who had too much leverage.
Speaker 2: So you're not concerned at this moment about the US
Speaker 2: dollar or the US Treasury losing safe haven asset. No,
Speaker 2: we're still a.
Speaker 3: Global reserve card, we are still a global reserve currency
Speaker 3: that we have a strong dollar policy.
Speaker 1: The dollar can go up and down to go and look.
Speaker 3: Back at President Trump's first term, I don't remember the
Speaker 3: exact number, but the dollar in twenty seventeen went down,
Speaker 3: I can't remember seven eight nine percent, and then once
Speaker 3: the tax bill was done, took off, took off the
Speaker 3: remainder of his term.
Speaker 2: Have you spoken to the Fed at all about contingency
Speaker 2: plans though? If financial stability risks flare up.
Speaker 3: Chair Powell and I have breakfast every week and we
Speaker 3: discuss a wide range of things, and you know, our
Speaker 3: staffs are always in contact. We have a market's room,
Speaker 3: they have a market's room. But specifically, did we discuss
Speaker 3: some kind of a break the glass? I think we're
Speaker 3: a long way from that.
Speaker 2: So when was the last time you guys spoke? We
Speaker 2: had breakfast last week?
Speaker 3: We had breakfast last week and it wasn't away game.
Speaker 1: I was over at the Fed and.
Speaker 2: No concern so far from the Fed chair and what
Speaker 2: he saw on the treasury market.
Speaker 1: I think we would have heard from the Fed chair.
Speaker 3: I think we heard from Governor Collins of Boston on Friday.
Speaker 3: We heard from Governor Weller today on his thoughts on
Speaker 3: what terrists mean so seems like businesses.
Speaker 2: When it comes to the FED chair, his term is
Speaker 2: up May twenty twenty six, so we're almost twelve months
Speaker 2: out from that. When are you going to start to
Speaker 2: think about have these discussions with the president about who
Speaker 2: should lead the FED?
Speaker 1: Well, we think about it all the time.
Speaker 3: I think, when are we going to start the interviewing candidates?
Speaker 1: And that'll be some time in the fall.
Speaker 2: In the fall, so about six months lead time. The
Speaker 2: US Supreme Court recently came out with the ruling that
Speaker 2: the executive branch, the president for now could oust top
Speaker 2: officials at independent agencies, and that has some individuals in
Speaker 2: the market a little bit concerned about what this could
Speaker 2: mean for the independence of the FED, which is really
Speaker 2: a cherished pillar of wanting to invest in America. Do
Speaker 2: you have any concern about potentially President Trump ousting FED
Speaker 2: Chair J Powell or the independence of the Fed?
Speaker 1: Well and Marie, I've.
Speaker 3: Repeatedly said that the FED has two duties, and I
Speaker 3: believe that monetary policy is a jewel box that's got
Speaker 3: to be preserved, and then they have regulatory policies, and
Speaker 3: I think we can have more of a discussion because
Speaker 3: the FED is one among three bank regulators, and there's
Speaker 3: the FED Controller of the currency and the FDICE. So
Speaker 3: I think it's very easy to delineate between those two.
Speaker 2: So at the moment, no concern, no concern. When you
Speaker 2: talk to FED Chair j Palet, at the moment, doesn't
Speaker 2: sound like they feel like they need to step in
Speaker 2: on this unraveling we saw last week with the bond market.
Speaker 2: Does the Treasury have any plans to do something if
Speaker 2: this was to become more unnerving?
Speaker 3: Well, look, the Treasury has lots of things we can do,
Speaker 3: but again I think we're a long way.
Speaker 2: From that, but all options would be on the table.
Speaker 3: Sure, But again we have a big toolkit that we
Speaker 3: can roll out. We do regular off the run buybacks.
Speaker 3: We could up the buybacks if we wanted.
Speaker 2: So just finally, I want to get your thoughts on
Speaker 2: something you told me John and lisaon February, which was
Speaker 2: that in your old world, you would be that person
Speaker 2: with your ear against the door trying to understand what
Speaker 2: policy makers were doing, so then you could predict where
Speaker 2: financial markets would go in this moment where we hear
Speaker 2: from top executives constantly. Today it was the Goldman Sachs CEO.
Speaker 2: Last week it was JB. Diamond, And there uncertainty, especially
Speaker 2: around tariff policy. What advice would you be giving to
Speaker 2: your old self.
Speaker 3: To look at the whole policy, because again, not you,
Speaker 3: but others in the media can pick one factor. So
Speaker 3: right now it's tariff tariff, tariff, But have you mentioned
Speaker 3: we have tax tax tax coming up, We have deregulation
Speaker 3: to regulation to regulation, so it's a mini the leg stool,
Speaker 3: and I would try to think about what's happening. The
Speaker 3: tariff sequencing was always going to be first, the tax
Speaker 3: bills going very well, and I think I've been pleasantly
Speaker 3: surprised at how quickly that's moving along. And then deregulation
Speaker 3: from our area on the financial side and in the
Speaker 3: rest of the economy that takes a little longer, but
Speaker 3: that will start kicking in September, October in the fall,
Speaker 3: and those are going to be very powerful.
Speaker 2: I believe you described as a three leg tool, and
Speaker 2: right now everyone is focused on one part of that leg,
Speaker 2: and that's the tariffs. As you say, when it comes
Speaker 2: to the tax cuts, right now, what the market is
Speaker 2: expecting and what could get done in Congress based on
Speaker 2: how slim the majority is for the Republicans is just
Speaker 2: an extension of current policy.
Speaker 1: I think that's wrong.
Speaker 3: I think that the underreported story in the media, the
Speaker 3: story this funder report doesn't get reported enough, is a
Speaker 3: democratic chaos, but that the underreported story is the remarkable
Speaker 3: Republican unity led by President Trump. Speaker Johnson first try
Speaker 3: got it instructs out of the House for the budget.
Speaker 3: He passed a clean CR first try. Senator or Leader
Speaker 3: Thoone pinged it back to the House very quickly with
Speaker 3: their instructions. And I had something along with Kevin Hassett
Speaker 3: had in a c chair called the Big Six, which
Speaker 3: also includes Leader Throone, Speaker Johnson, Senator Crapo, Committee Chair
Speaker 3: Jason Smith. And everyone's very aligned. And there's going to
Speaker 3: be a lot more bells and whistles other than in
Speaker 3: tc other than just changing the date on TCJA.
Speaker 2: So your pitch right now to financial market participants to
Speaker 2: consumers is you need to see the entire picture.
Speaker 3: Well, you need to see the entire picture. And as
Speaker 3: President Trump said the other day, stay cool. It was
Speaker 3: my message when I was out with you. You on April. Second,
Speaker 3: it was to the countries. These are maximum rates, So
Speaker 3: you ask if it was a Maximus strategy. If you
Speaker 3: don't elevate, this is your maximum rate. So don't elevate.
Speaker 1: You have in.
Speaker 3: Markets the upside barrier, you don't have unlimited risk, and
Speaker 3: then come to us and we will negotiate.
Speaker 1: In good faith.
Speaker 2: Can you guarantee clarity in ninety days.
Speaker 3: I think clarity is through the eye of the beholder.
Speaker 3: But I can guarantee you that we're going to run
Speaker 3: a robust process, and I think the market can take
Speaker 3: great comfort in that.
Speaker 2: So maybe some of that uncertainty starting to evaporate.
Speaker 3: Yeah, if we measure uncertainty by the VIS I think
Speaker 3: that the VIX. I don't want to make market calls,
Speaker 3: but I think that the VIC spiked and is likely peaked.
Speaker 2: Secretary Bessant, we really appreciate your time. Of course, that
Speaker 2: was Scott Bessant, the US Treasury Secretary here in Buenos Aires,
Speaker 2: and his pitch to the world. It's a three legged stool.
Speaker 2: In terms of Trump administration's policy proposals. Right now, the
Speaker 2: market squarely focused on tariffs,