WEBVTT - US Treasury Secretary Scott Bessent Talks Ukraine, Tariffs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news for our Bloomberg audiences worldwide.

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<v Speaker 1>I'm David West, and I'm delighted to welcome now the

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<v Speaker 1>US Treasure Secretary. He's mister Scott Besson. So, mister Secretary,

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<v Speaker 1>thank you so much for joining us. Ukraine is at

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<v Speaker 1>the top of everyone's mind right now and should be

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<v Speaker 1>the deal that you were the point person on as

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<v Speaker 1>you went over to Kiev to actually first present it.

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<v Speaker 1>We all watch what happened in the Oval office. I

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<v Speaker 1>guess the simple question is can this deal be saved?

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<v Speaker 2>Well, David, the question is which deal, the peace deal

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<v Speaker 2>or the economic deal, because clearly it's very difficult to

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<v Speaker 2>do an economic deal with a leader who doesn't want

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<v Speaker 2>to do a peace deal. And I will tell you

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<v Speaker 2>I was sitting three away from President President Zolensky, and

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<v Speaker 2>this has to be one of the great diplomatic own

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<v Speaker 2>goals in history.

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<v Speaker 1>If mister Zelenski called back right now and said I'm sorry,

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<v Speaker 1>I want to put it back together, what would he

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<v Speaker 1>have to do.

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<v Speaker 3>I don't know. Mister Zelenski and his team were.

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<v Speaker 2>Taken out of the Oval and they kept coming back

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<v Speaker 2>with that message, and then they were.

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<v Speaker 3>They left the White House and it's.

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<v Speaker 2>Going to take a lot of repair, and David the

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<v Speaker 2>real tragedy here. Maybe things can be repaired with the administration,

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<v Speaker 2>but I don't know how the American people are going

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<v Speaker 2>to feel. And more importantly, the economic deal, the meeting today,

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<v Speaker 2>the real purpose was to show that there was no

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<v Speaker 2>daylight between the Americans and the Ukrainians. So President Trump's

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<v Speaker 2>idea was to show that we with the.

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<v Speaker 3>With the economic deals, to show.

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<v Speaker 2>That we're more intertwined, and that would be a symbol

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<v Speaker 2>to the Ukrainian people, to Russian leadership, and to the

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<v Speaker 2>American people. And President Zelenski blew that up today. I'm

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<v Speaker 2>not sure what he was thinking.

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<v Speaker 1>As I say, you were the point person really for

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<v Speaker 1>the administration on the economic deal. We all thought on

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<v Speaker 1>the outside we were very close. In fact, I think

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<v Speaker 1>many of us thought there'd be a signing today, that

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<v Speaker 1>we'd have some form of economical day. Were we as

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<v Speaker 1>close as those of the outside thought. Were you surprised?

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<v Speaker 3>Again?

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<v Speaker 2>I was shocked, shocked the President Zelensky would come into

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<v Speaker 2>the Oval office behave like this, speak to the President,

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<v Speaker 2>speak to the Vice president, but more importantly, disrespect the

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<v Speaker 2>American people like this. I know he's under a great

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<v Speaker 2>deal of stress. He and I had a very heated

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<v Speaker 2>exchange in Kiev. I think the same thing may have

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<v Speaker 2>happened between him and Vice President Vance and Secretary of

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<v Speaker 2>Rubio in Munich, and you know, to come in and

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<v Speaker 2>behave like this was unacceptable. And look, I mean, what

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<v Speaker 2>better runway? What better runway did he have that President

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<v Speaker 2>friends Emmanuel McCrone in the Oval on Monday yesterday, we

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<v Speaker 2>had a fantastic meeting with Prime Minister Kure Stammer from

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<v Speaker 2>the UK and then President Zelensky today. I mean, you

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<v Speaker 2>could not have asked for a better arc. And he

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<v Speaker 2>walked in and I'm not sure what he was thinking.

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<v Speaker 1>Many of us have been in heated negotiations, not at

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<v Speaker 1>this level, but still heating negotiations where people pound the table,

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<v Speaker 1>they may walk out the door and things like that,

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<v Speaker 1>and it's actually part of the negotiation. Is that what

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<v Speaker 1>we saw today or was this a more fundamental rupture?

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<v Speaker 2>David, You don't do a negotiation with the President of

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<v Speaker 2>the United States in public like this. That we were

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<v Speaker 2>scheduled to have lunch afterwards, that perhaps he could have

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<v Speaker 2>brought up some of the points. Instead, he chose to

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<v Speaker 2>let things go into a downward spiral on worldwide television.

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<v Speaker 2>And you know, again, I keep coming back to the

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<v Speaker 2>disrespect of the American people. It was one thing for president.

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<v Speaker 2>President Zelensky and I had an extended, heated negotiation in Kiev,

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<v Speaker 2>but we were going to get this economic agreement done.

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<v Speaker 2>But when you bring it out to the public like this,

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<v Speaker 2>we'll see if there's any coming back.

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<v Speaker 1>If there is further negotiation. Do you expect to remain

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<v Speaker 1>the point person on the economic deal.

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<v Speaker 2>I expect to be the point person on the economic deal.

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<v Speaker 2>But ultimately it's going to be up to President Trump

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<v Speaker 2>whether he thinks that he can continue negotiating with President Zolensky.

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<v Speaker 1>What is in it for Ukraine the economic deal? Why

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<v Speaker 1>is it in their best interest to sign this deal?

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<v Speaker 2>The economic deal is a fantastic deal because that if

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<v Speaker 2>you think the US is willing to co join its

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<v Speaker 2>economic interest with Ukraine, and like I said, a very

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<v Speaker 2>very strong symbol potential for very high returns for Ukrainian people.

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<v Speaker 2>And again it was meant to be a very strong

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<v Speaker 2>symbol to Russian leadership that the US and Ukrainian people

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<v Speaker 2>are more co joined and we have.

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<v Speaker 3>Economic interest on the ground.

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<v Speaker 2>Economic security becomes military security. The economy of the Ukraine

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<v Speaker 2>of Ukraine coming out of this, I thought our deal

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<v Speaker 2>would have really been an accelerant to the two Ukrainian growth.

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<v Speaker 2>I mean, you look at Poland next door, and since

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<v Speaker 2>the Iron Curtain came down. When it came down, Poland

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<v Speaker 2>and Ukraine had roughly the same size economies. Now Poland

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<v Speaker 2>before the war started, Poland's was four times larger. So

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<v Speaker 2>Ukraine has. There's a lot of potential. We'd hope to

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<v Speaker 2>help unlock it. We'll see whether a deal can be done.

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<v Speaker 1>Would it be beneficial to Ukraine? Tho I understand why

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<v Speaker 1>it might have benefit the United States. You've heard some

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<v Speaker 1>people like Larry Summers said to me, you know, are

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<v Speaker 1>like Versailles, and except that the Germans were the aggressors

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<v Speaker 1>of World War One, these are the victims. Why should

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<v Speaker 1>they give up natural resources? What's wrong with that argument?

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<v Speaker 2>Well, look, I think professor Summers should comment on things

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<v Speaker 2>where he has all the facts.

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<v Speaker 3>And Versailles was debt. This is equity.

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<v Speaker 2>We get nothing If the Ukrainian people don't get anything,

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<v Speaker 2>it's when when So there is no debt component here,

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<v Speaker 2>many of the European wells, or much of the European

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<v Speaker 2>aid has come in the form of debt. Thus far

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<v Speaker 2>Us is put in grants and this is not debt.

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<v Speaker 2>If it were debt, the Ukrainian bonds would not have

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<v Speaker 2>been going up on the deal.

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<v Speaker 3>So I think the.

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<v Speaker 2>Mister Summers, Professor Summers should maybe call me and ask

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<v Speaker 2>for the details before commenting. Maybe it's a nice media

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<v Speaker 2>line that it's versi, but it's just not the truth.

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<v Speaker 1>You also have some other responsibilities besides trying to get

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<v Speaker 1>an economic deal in Ukraine. Let's talk a little bit

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<v Speaker 1>of the economy, and specifically you and I have talked before.

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<v Speaker 1>You have as a goal, as I recall, getting the

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<v Speaker 1>deficit down to three percent of GDP the United States

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<v Speaker 1>saying it's going to take a little time to do it,

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<v Speaker 1>not right away. What role does revenue from tariff's play

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<v Speaker 1>in your spreadsheet when you look at getting to that

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<v Speaker 1>three percent number.

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<v Speaker 3>Good.

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<v Speaker 2>That's a great question because that over the coming weeks months,

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<v Speaker 2>as we put the budget together, your viewers are going

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<v Speaker 2>to see lots of different nomenclature. There's CBO scoring, and

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<v Speaker 2>CBO scoring will likely not include any tariff income, and

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<v Speaker 2>so much of the tariff income could be substantial. We

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<v Speaker 2>will see where the tariffs finally end up. The China tariffs,

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<v Speaker 2>since they were put on, have brought in substantial revenue.

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<v Speaker 2>They continue to bring in substantial revenue. President Trump has

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<v Speaker 2>talked about reciprocal tariffs. If tariffs are his favorite word,

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<v Speaker 2>I would say reciprocal has gotten to be his second

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<v Speaker 2>favorite word. And in the reciprocal tariffs, you actually don't

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<v Speaker 2>know the path of what's going to happen, David, because

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<v Speaker 2>the idea there is that if Europe has a twelve

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<v Speaker 2>and a half percent tax on our cars, we could

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<v Speaker 2>either put a twelve and a half percent tax on

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<v Speaker 2>theirs or the terroffs could get dropped altogether. So it's

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<v Speaker 2>going to be very path dependent. But I would expect

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<v Speaker 2>that with the tenure scoring that the CBO likes to use,

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<v Speaker 2>that there could be substantial tariff income over the next

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<v Speaker 2>ten years.

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<v Speaker 1>When we look at tariffs, there's a lot of different

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<v Speaker 1>things being talked about, proposed, threatened, even imposed. One of

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<v Speaker 1>those Mexico, which comes up next week. Is it important

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<v Speaker 1>to get the revenue from the Mexico tariffs because I

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<v Speaker 1>know Mexico is sort of moving it appears right now.

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<v Speaker 1>For example, the respect to tariffs on things coming into

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<v Speaker 1>Mexico from China. Can they get out off the hook

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<v Speaker 1>on tariffs?

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<v Speaker 2>So the tariff negotiation isn't under the purview of Treasury,

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<v Speaker 2>it's a ustr US Trade Representative and Commerce, So I'm

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<v Speaker 2>going to leave that question to them. I do think

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<v Speaker 2>one very interesting proposal that the Mexican government has made

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<v Speaker 2>is perhaps matching the US.

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<v Speaker 3>On our China tariffs.

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<v Speaker 2>I think it would be a nice gesture if the

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<v Speaker 2>Canadians did it also, so in a way we could

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<v Speaker 2>have fortress North America from the flood of can from

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<v Speaker 2>the flood of Chinese imports. That's coming out of the

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<v Speaker 2>most unbalanced economy in the history of modern times.

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<v Speaker 1>Another one of the goals I think we've talked about

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<v Speaker 1>is three percent and growth. Again, I'm not saying you're

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<v Speaker 1>going to go right away, but that's the goal ultimately,

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<v Speaker 1>as I understand it, we have some people now starting

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<v Speaker 1>to say the indications about a coming recession are going up,

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<v Speaker 1>including Torst and Slock from Apollo, somebody you know who

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<v Speaker 1>came out with a note today saying the probabilities of

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<v Speaker 1>a recession are going up? Is that what your number show.

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<v Speaker 3>You, David, It's early.

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<v Speaker 2>I do think that we're seeing kind of the hangover

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<v Speaker 2>from this excess spending in the Biden.

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<v Speaker 3>The Biden four years. And what we are going.

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<v Speaker 2>To do now is something that I've talked about several

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<v Speaker 2>times on your show in the past. We're going to

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<v Speaker 2>reprivatize the economy and as we bring down government spending

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<v Speaker 2>and get the private sector moving again. That may not

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<v Speaker 2>be a perfect one to one ratio, but I'm sure

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<v Speaker 2>it's going to happen. President Trump said the other day

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<v Speaker 2>someone said, well, when does it become your economy? He said,

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<v Speaker 2>probably six or twelve months out. I think I would

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<v Speaker 2>agree with that.

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<v Speaker 1>We also are seeing some numbers, some sentiment numbers. The

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<v Speaker 1>consumer sentiment indicates that inflation expectations are rising. Now that's

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<v Speaker 1>not necessarily the hard numbers. We're not necessarily seeing it in

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<v Speaker 1>consumer spending, yet, sooner or later those have come into Think,

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<v Speaker 1>what do you think the American people get wrong as

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<v Speaker 1>they anticipate more inflation.

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<v Speaker 2>Well, I think, look, I'm not going to question the

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<v Speaker 2>American people's current conditions because we're still living through this

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<v Speaker 2>Biden inflation. I think that over the next six and

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<v Speaker 2>twelve months that as we deregulate, drill more American energy,

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<v Speaker 2>and establish our energy program, and then make the twenty

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<v Speaker 2>seventeen tax cuts and job back permanent, gets some certainty

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<v Speaker 2>that I think that we could very quickly go back

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<v Speaker 2>to the federal reserve target of two point zero percent.

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<v Speaker 1>We've also talked about the tenure, and you've indicated that

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<v Speaker 1>the yield on the tenure is an important indicator for

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<v Speaker 1>you that's on your dashboard as you assess how well

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<v Speaker 1>the economic plan is doing. It's gone down to four

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<v Speaker 1>point two from four point four since the election, but

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<v Speaker 1>it's still at four point two. Do you have a

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<v Speaker 1>sense of it? And I'm not asking for a specific number,

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<v Speaker 1>but a range that would indicate this economic policy is working.

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<v Speaker 3>Well.

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<v Speaker 2>David, Again, it's going to depend on how quickly the

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<v Speaker 2>inflation drops, what the growth level is, but I would

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<v Speaker 2>say that I believe interestrates have come down more than

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<v Speaker 2>twenty basis points or twenty something since the election. And

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<v Speaker 2>the other thing that's important is mortgage rates have come

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<v Speaker 2>down and the spread on mortgages versus treasuries have come

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<v Speaker 2>down since November, which I think is indicative of some

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<v Speaker 2>of the things that we're going to do on financial deregulation.

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<v Speaker 2>So the housing market is stuck now, but I would

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<v Speaker 2>expect that at the housing market sometime in the next

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<v Speaker 2>few weeks is going to unfreeze. The other thing on

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<v Speaker 2>the economy here is I am having been in the

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<v Speaker 2>investment business for thirty five years, I'm used to anomalies,

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<v Speaker 2>and we've got a lot of anomalies going here, whether

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<v Speaker 2>it was the tragic fires on California, the cold weather

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<v Speaker 2>in the Northeast, So we're not really looking at kind

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<v Speaker 2>of comparable data. Also, there's been a big jump in

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<v Speaker 2>import data or the level of imports in the economic data,

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<v Speaker 2>and some of that may be manufacturers or consumers pre

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<v Speaker 2>stocking and anticipation of anticipated terraffs.

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<v Speaker 1>Again, if you're looking at the yield in the Chine,

0:13:51.480 --> 0:13:54.480
<v Speaker 1>I'm curious about what levers you have as Sexuary Treasury

0:13:54.760 --> 0:13:57.440
<v Speaker 1>to pull or push. To the fact that you've mentioned

0:13:57.640 --> 0:14:01.560
<v Speaker 1>financial regulation and deregulation. What about the tax bill, where

0:14:01.600 --> 0:14:03.360
<v Speaker 1>are we on that, What will that do to the

0:14:03.440 --> 0:14:05.400
<v Speaker 1>yield on the tenure and what of the likelihood of

0:14:05.440 --> 0:14:06.120
<v Speaker 1>the game passed.

0:14:08.480 --> 0:14:11.200
<v Speaker 2>Look, I think we're passed fail on the tax bill.

0:14:11.880 --> 0:14:16.120
<v Speaker 2>In terms of we are we're going to pass, we

0:14:16.200 --> 0:14:17.679
<v Speaker 2>are going to get it pass.

0:14:18.320 --> 0:14:20.080
<v Speaker 3>We started this week.

0:14:20.480 --> 0:14:23.720
<v Speaker 2>I lead something that's called the Big Six, So the

0:14:23.760 --> 0:14:27.720
<v Speaker 2>Treasury Secretary Kevin Has, the Chair of the National Economic Council,

0:14:28.160 --> 0:14:34.200
<v Speaker 2>Senator's Leader Thoon ranking Member or the Chair of the

0:14:34.200 --> 0:14:40.200
<v Speaker 2>Finance Committee, Senator Crapo, Speaker Johnson, and Jason Smith, who

0:14:40.880 --> 0:14:44.120
<v Speaker 2>the chairs the House Committee. So the six of us

0:14:44.160 --> 0:14:48.040
<v Speaker 2>have started working on the bills. They're going into reconciliation.

0:14:48.680 --> 0:14:52.920
<v Speaker 2>So I'm quite optimistic on the progress they're making. The

0:14:52.960 --> 0:14:56.320
<v Speaker 2>House had a very close vote, but Speaker Johnson got

0:14:56.360 --> 0:15:00.680
<v Speaker 2>it over the line, and again I think that's certainty

0:15:01.680 --> 0:15:08.120
<v Speaker 2>will help establish the parameters. And then again it's the

0:15:08.120 --> 0:15:14.120
<v Speaker 2>whole the deregulatory agenda and the getting energy prices down,

0:15:14.320 --> 0:15:17.760
<v Speaker 2>so I think we could go back to target pretty quickly.

0:15:18.480 --> 0:15:20.640
<v Speaker 2>And you know, on the other on the they just

0:15:20.680 --> 0:15:23.480
<v Speaker 2>for a minute. On the on the other side, what

0:15:23.560 --> 0:15:25.800
<v Speaker 2>we're not getting any credit for yet that I'm very

0:15:25.800 --> 0:15:31.520
<v Speaker 2>optimistic about is the Department of Government efficiency that I

0:15:31.640 --> 0:15:35.400
<v Speaker 2>think that there are substantial savings to be found here

0:15:36.080 --> 0:15:37.480
<v Speaker 2>and there's a lot.

0:15:37.400 --> 0:15:38.440
<v Speaker 3>Of low hanging fruit.

0:15:38.600 --> 0:15:42.240
<v Speaker 2>I don't know what the number is, but that that's

0:15:42.240 --> 0:15:43.200
<v Speaker 2>a pretty good story.

0:15:43.360 --> 0:15:46.000
<v Speaker 3>So back to if we can keep.

0:15:45.880 --> 0:15:49.440
<v Speaker 2>Growth, get growth up through deregulation and permanency in the

0:15:49.480 --> 0:15:54.040
<v Speaker 2>tax cuts, and then cut spending. Because from the first

0:15:54.120 --> 0:15:56.400
<v Speaker 2>time I was on your show, we talked about this

0:15:56.480 --> 0:16:00.120
<v Speaker 2>blowout government deficit, so we've got to get that down.

0:16:00.520 --> 0:16:05.160
<v Speaker 1>Well, let's talk about actually doge doge and how material

0:16:05.200 --> 0:16:06.400
<v Speaker 1>that is in your competition?

0:16:06.400 --> 0:16:06.800
<v Speaker 3>Three percent.

0:16:06.840 --> 0:16:09.320
<v Speaker 1>I understand you don't have a specific number, but will

0:16:09.320 --> 0:16:11.720
<v Speaker 1>it be material because it is a very big budget,

0:16:11.760 --> 0:16:13.440
<v Speaker 1>you have to take a lot of money after the

0:16:13.760 --> 0:16:16.480
<v Speaker 1>spending side to really make a material difference in that

0:16:16.520 --> 0:16:17.960
<v Speaker 1>deficit as a percentage of GDP.

0:16:18.600 --> 0:16:25.680
<v Speaker 2>Well, David, I think we can make a pretty big

0:16:25.760 --> 0:16:28.440
<v Speaker 2>hit here. And the way to think about it is

0:16:28.760 --> 0:16:33.880
<v Speaker 2>every three hundred billion is one percent of GDP. So

0:16:34.560 --> 0:16:38.680
<v Speaker 2>is there three hundred billion of savings there? Maybe is

0:16:38.760 --> 0:16:44.480
<v Speaker 2>there one hundred and fifty, But everything starts moving us

0:16:44.600 --> 0:16:49.240
<v Speaker 2>back toward the target, and were determined to get this down.

0:16:49.800 --> 0:16:54.520
<v Speaker 2>President Trump at the cabinet meeting talked about balancing the budget.

0:16:54.560 --> 0:16:58.000
<v Speaker 2>He asked me, how soon can we do that? And

0:16:58.920 --> 0:17:03.040
<v Speaker 2>we'll see, But I do suspect in terms of waste, fraud,

0:17:03.120 --> 0:17:06.040
<v Speaker 2>and abuse. I think most of us think in terms

0:17:06.080 --> 0:17:08.840
<v Speaker 2>of waste and abuse. I got to tell you that

0:17:09.000 --> 0:17:13.399
<v Speaker 2>I'm slightly shocked at some of the fraud we're finding,

0:17:13.440 --> 0:17:14.919
<v Speaker 2>and you're going to be hearing about more of that

0:17:15.240 --> 0:17:16.640
<v Speaker 2>over the next couple of weeks.

0:17:16.880 --> 0:17:20.000
<v Speaker 1>And finally, mister Secretary, when you went into this job,

0:17:20.080 --> 0:17:22.520
<v Speaker 1>you had some specific goals of things you saw you

0:17:22.560 --> 0:17:24.960
<v Speaker 1>get a complaghed like three percent growth, like getting the

0:17:24.960 --> 0:17:27.560
<v Speaker 1>deficit dout of three percent of GDP. Now that you're

0:17:27.640 --> 0:17:30.720
<v Speaker 1>inside and you've actually seen it from the inside, are

0:17:30.760 --> 0:17:35.040
<v Speaker 1>you optimistic about making those numbers? And what's the biggest

0:17:35.119 --> 0:17:35.679
<v Speaker 1>risk to that?

0:17:36.560 --> 0:17:40.920
<v Speaker 2>Look, it's execution, and we go out every day we

0:17:41.080 --> 0:17:46.280
<v Speaker 2>try to we have our goals. As we said, We've

0:17:46.359 --> 0:17:51.800
<v Speaker 2>recentered on the tenure, which is for capital formation for mortgages.

0:17:52.240 --> 0:17:56.240
<v Speaker 2>We are working on the budget deal, we are working

0:17:56.359 --> 0:18:02.439
<v Speaker 2>on substantial deregulation. We're working on the President's policy of

0:18:02.720 --> 0:18:05.760
<v Speaker 2>energy dominance. And if we get all those done, I

0:18:05.880 --> 0:18:10.800
<v Speaker 2>think that it'll be easily achievable. But David, actually I'll

0:18:10.800 --> 0:18:13.560
<v Speaker 2>take back the word easily. What I am learning in

0:18:13.680 --> 0:18:16.800
<v Speaker 2>Washington is nothing's easy, but everything's possible.

0:18:17.280 --> 0:18:19.800
<v Speaker 1>Okay, thank you so much, mister secretary. Really great to

0:18:19.840 --> 0:18:22.480
<v Speaker 1>talk to you. That's the United States Treasure Secretary, Scott Bessen.