Bessent on Trade Talks, Powell Future, Argentina, Dollar

Summary

In this insightful Bloomberg Television episode, discussions revolve around recent trade talks, U.S. tariff policies, and international economic relations. The interview delves into the U.S.'s strategic moves in Argentina, the potential impacts of China's economic activities in Latin America, and the intricacies of ongoing trade negotiations with Japan and other global partners. Key highlights include the implications of China's resource-heavy deals, the U.S.'s approach to tariffs as a negotiation tool, and the sustained communication between U.S. financial leaders. The dialogue provides a comprehensive analysis of current economic policies' effects on global markets, highlighting the U.S.'s commitment to maintaining economic stability amidst global challenges.

Highlights

• The IMF's $20 billion agreement with Argentina marks significant economic support. 💸
• Currency and fiscal adjustments in Argentina are crucial for economic stability. 📊
• China's aggressive economic deals in Africa and Latin America pose challenges. ⚖️
• The U.S. focuses on strategic trade negotiations with Japan and other allies. 🇯🇵
• Treasury discussions hint at potential market adjustments to manage economic stability. 📈

Key Takeaways

• Argentina's agreement with IMF is seen as a pivotal step for economic recovery. 🇦🇷
• Trade negotiations are key to reducing tariffs and overcoming trade barriers globally. 🌍
• China's influence in Latin America is under scrutiny by the U.S. 🇨🇳
• U.S. trade policies aim to create strategic advantages against China's market tactics. 🇺🇸
• The importance of maintaining diplomatic ties while pushing for economic reforms is emphasized. 🤝

Overview

This episode of Bloomberg Television provides a deep dive into the world of global trade talks, with a special focus on the U.S.'s strategic economic maneuvers. The discussion highlighted Argentina's agreement with the IMF, which is a significant step towards economic recovery. The financial assistance aims to help Argentina stabilize its economy through necessary fiscal, monetary, and currency adjustments.

The show also explored China's influential presence in Latin America, drawing parallels with its economic strategies in Africa. The U.S. is concerned about China's growing economic footprint, which often involves taking over critical resources and imposing heavy debts on smaller countries. There's an emphasis on countering such moves with robust U.S. trade policies aimed at ensuring fair trade practices.

Another key segment delved into the current trade negotiations involving Japan and the U.S. The dialogue pointed out the complexities of such negotiations, especially with the involvement of non-tariff trade barriers. The U.S. is working towards creating advantageous positions not just for itself, but also for its allies, showing a broader strategy to counter China's economic tactics.

Chapters

• 00:00 - 01:00: IMF Agreement with Argentina In this chapter, the discussion centers around the recent $20 billion agreement announced by the International Monetary Fund (IMF) with Argentina. Noteworthy is the visit of a U.S. Treasury secretary to Argentina, the first since Trump's initial administration during a G20 meeting. The chapter highlights the Trump administration's focus on Argentina, noting this visit marks significant policy readjustments and the start of a new phase in economic collaboration.
• 01:00 - 02:00: Currency and Trade Negotiations with Argentina This chapter provides an overview of the significant economic adjustments undertaken by Argentina, including fiscal, monetary, and currency changes. The International Monetary Fund (IMF) has committed 20 billion dollars, while the World Bank has allocated 12 billion to support these efforts. The conversation highlights international support for President Meili's leadership in navigating these historic economic reforms.
• 02:00 - 03:00: Latin America and China Policy The chapter discusses the trade negotiations between Latin America, specifically Argentina, and China. There's a focus on bringing Argentina back from economic challenges, particularly related to a 10% trade rate imposed on them. The key point is the ongoing and upcoming negotiations, with a suggestion that anything might be possible, including potentially lowering the rate to zero if the negotiations go well. The chapter emphasizes the need for Argentina to present strong arguments ('bring your A-game') in these negotiations.
• 03:00 - 04:00: US Credit Line and China Swap with Argentina The challenges of overcoming tariff and non-tariff trade barriers, currency manipulation, and labor and facilities subsidization form a complex landscape that the US faces. The transcript touches upon these significant issues, noting them as key obstacles in international trade.
• 04:00 - 05:00: US Economic Policy and Tariff Strategy The chapter discusses the US economic policy, focusing on its tariff strategy as it relates to global trade dynamics. It draws attention to the potential pitfalls of foreign policies by highlighting China's economic dealings on the African continent. The narrative explains how China has created significant financial dependencies by acquiring mineral rights and imposing heavy debts on African nations, under the guise of providing aid. The text implies a cautionary note against similar circumstances occurring elsewhere due to undisclosed debt and strategic resource control.
• 05:00 - 06:00: Trade Negotiations with Japan and Spain The chapter discusses international trade negotiations involving Japan and Spain, highlighting concerns over tolling arrangements and the impact on future generations. It emphasizes the need to avoid further economic disadvantages, similar to those already experienced in Latin America. The chapter notes China's foreign exchange swap with Argentina and questions the possibility of a direct credit line from the United States, concluding that there is no such consideration at the moment.
• 06:00 - 08:00: China Tariffs and Global Trade Impact The chapter discusses the impact of tariffs imposed by China on global trade. It highlights the continued economic policies of governments in response to these tariffs. The Peronist government borrowed 5 billion, which has yet to be paid back. There's a mention of China's cooperation with the IMF announcement, suggesting an extension of the financial arrangements. The discussion seems to focus on whether these economic measures, including a Chinese swap, should continue or be revised.
• 08:00 - 10:00: US Dollar and Treasury Markets The chapter discusses the dynamics of foreign exchange inflows and their role in paying off financial obligations. It includes a conversation that took place recently, discussing changes in the speaker's role in negotiations related to tariff policy within less than two weeks. Initially, the speaker was not directly involved in setting specific tariff rates but has always been a part of tariff policy discussions.
• 10:00 - 12:00: Discussions with Fed Chair Powell The chapter titled 'Discussions with Fed Chair Powell' focuses on various economic efforts and negotiations involving the speaker and the administration. The individual mentions their previous focus on tax-related matters and highlights its success. They also speak about engaging in trade negotiations, emphasizing a current 90-day pause initiated by the President. The aim is to expedite negotiations with key trading partners, citing recent and upcoming discussions with countries such as Vietnam, Japan, and South Korea.
• 12:00 - 14:00: Future of Fed Leadership The chapter discusses the future of leadership at the Federal Reserve and the importance of setting up a structured process. The speaker emphasizes the necessity for an orderly approach and highlights that the President will be actively involved, especially with key trading partners. The chapter also mentions ongoing negotiations involving Japanese and Spanish teams.
• 14:00 - 16:00: Broader Economic Policies and Market Impact The chapter titled 'Broader Economic Policies and Market Impact' discusses international trade negotiations involving different countries. Specifically, it highlights a pre-arranged meeting with the Spanish economics minister, emphasizing that it was not a trade negotiation. In contrast, discussions with Japan are characterized as trade negotiations, with the Japanese Prime Minister indicating a cautious approach to reaching agreements. The idea of a 'first mover advantage' is introduced, suggesting that early action could be beneficial for allies involved. The chapter explores the dynamics and possible outcomes of these economic interactions.

Bessent on Trade Talks, Powell Future, Argentina, Dollar Transcription

• 00:00 - 00:30 So you've come here at a time when the IMF has just announced this $20 billion agreement with Argentina, but we haven't seen a Treasury secretary come to Argentina since Trump's first administration, and that was for a G20. So why the emphasis from the Trump administration on Argentina? Well, Anne-Marie, a couple of reasons. The reason for being here today is today's a from day. So the administration has done through readjustments, and this marks the beginning of the third one.
• 00:30 - 01:00 So they did a large fiscal adjustment, a large monetary adjustment, and they're doing it or they announced on Friday a large currency adjustment. IMF has allocated 20 billion to them. The World Bank has allocated 12 billion. And I wanted to come here today to show support for President Meili and his commitment to what I think is historic in terms of
• 01:00 - 01:30 bringing Argentina back from the precipice when it comes to the trade negotiations. I'm sure you spoke with President Melaye about the 10% rate that Argentina was hit with. Do you think at some point that can come down to zero? Look, I think we're going to start the negotiations. And just like with everyone else, I'm telling him, bring your A-game. We'll see what you got and we'll go from there. Can any country go to zero? Well, again, we'll see. It is I don't know what's going to happen with the negotiations because
• 01:30 - 02:00 we've got a whole box of things We've got to overcome tariff, non-tariff trade barriers, currency manipulation and subsidies, subsidization of labor and facilities. So there's a big menu there. There's been an early focus on Latin America, writ large from the Trump administration in the first 100 days. Is Latin America policy also, in a sense, China policy for this
• 02:00 - 02:30 administration? Well, I think that might be a good description because what we are trying to keep from happening is what has happened on the African continent, where China has signed a number of these kind of rapacious deals mart as aid, where they are really they take they've taken mineral rights, they've added huge amounts of debt on to these countries balance sheets. It's undisclosed to any of the other
• 02:30 - 03:00 international organizations. They've got tolling arrangements. So they're they're guaranteeing that future generations are going to be the poorer and without resources. And we don't want that to happen any more than it already has in Latin America. China has a foreign exchange swap with Argentina. Would you consider a credit line directly from the United States? That's not under consideration in terms of. So they have an $18 billion credit swap in R and B, Argentina under the previous
• 03:00 - 03:30 Peronist government drew down 5 billion and that will remain outstanding. The Chinese show very good faith effort after the announcement or in conjunction with the IMF announcement. So that is going to be rolled forward for a year. But do you want them to get rid of that swap with Beijing? Well, I think as this administration continues their stay the course of their economic policies, they should
• 03:30 - 04:00 eventually have enough foreign exchange inflows to be able to pay that off. So less than two weeks ago, you and I were talking outside of the White House after what the president called Liberation Day, and you said you weren't part of the negotiations. Now you're leading them. What's changed in these past 12 days? No, no, no. What I said was I didn't construct the actual tariff rate, the tariff rates. I've always been part of the tariff policy.
• 04:00 - 04:30 I had been focusing on tax. Maybe you want to talk about that later. That's going very well. And now with the trade negotiations, I am going to be part of that. And the President has hit a 90 day pause button and we are moving quickly with many of our most important trading partners. So we had Vietnam and last week we had the Japanese in on Wednesday, South Korea next week.
• 04:30 - 05:00 So it's going to move fast. And we. But the important thing for your viewers to know is we're setting up a process and we are going to run that process. It's going to be orderly. And at the end of the day, especially for the most important trading partners, the president's going to be involved. So when it comes to the current negotiations this week, you're also sitting down again with the Spanish negotiating team excuse me, the Japanese negotiating team, and also the Spanish A. Economy minister.
• 05:00 - 05:30 While the Spanish economics minister was just a pre-arranged meeting he and I have never met. So that is not a trade. Sit down. The Japanese meeting is a trade negotiation. The Japanese Prime Minister recently said he's not going to rush to get a compromise in a negotiation. How quickly do you think you can see these deals come to fruition? Well, again, I think there will be advantage to our allies, especially in a first mover advantage. Usually the first person who makes a
• 05:30 - 06:00 deal gets the best deal. So you think will be first. It's their choice. Is there a handful of countries that you expect to have a deal before the 90 days is up? Oh, I think there could be numerous countries and it may not be the actual trade document, but we will have an agreement in principle and be able to move forward from there. So we're talking about a dozen or 70 plus. I think it's going to depend, but we're
• 06:00 - 06:30 going to move with all deliberate speed. And again, it's going to be a process. It's going to be USTR who just has mountains of data that they've been collecting over the years, because in a funny way, the tariffs are the easiest part. So a country with high tariffs, you can just say, okay, this, this, this, this, get rid of it. It's a non-tariff trade barriers that are more insidious, more difficult to
• 06:30 - 07:00 spot. And it's probably going to take a little little longer to exorcise those demons. When you said you weren't part of the rates in that chart that the president held in the Rose Garden. Is he taking a maximalist approach? Neil Dutta recently wrote that President Donald Trump has cracked a lot of eggs, and now Scott Bassett, the Treasury secretary, needs to make an omelet. Is that how you view the situation right now? I view not giving away negotiating secrets on worldwide television. The as the essence of negotiating.
• 07:00 - 07:30 You recently talked about getting deals done quickly with partners to then confront China together. When you're in these negotiations with trading partners, are you looking for them to offer up something to combat Beijing? Well, I think combat is an aggressive word. But, look, I think now that we have the China tariffs in place, that they're going to want to have some protection from Chinese goods flooding their markets, that China's business model is like from that Disney movie where the the brooms are carrying the buckets.
• 07:30 - 08:00 They're not going to stop manufacturing because the U.S. has a tariff wall up. So those goods are going to go somewhere. Where do you think they're going to dump? Well, I think it depends on the good. We have exemptions now, though, for electronics. So we still expect electronics to come into the United States with the smaller tariff rate, the Fed and all 20%. But you were asking, where are they going to dump? I think it will depend on what is the
• 08:00 - 08:30 good, you know, higher value added manufacturing goods likely in Europe, Canada, in the in the G7, and then kind of more of the bubbles and knickknacks in the global south. China's Commerce Ministry came out when the tariff rates were going above 100% and called it, quote, a joke. Has there been negotiations on any level between Beijing and Washington right now? Well, look, the it will come from the top. President Trump, Chairman Xi have a very
• 08:30 - 09:00 good relationship. And I wouldn't say that these are not a joke. I mean, these are big numbers. I think no one thinks are sustainable, wants them to remain here. But it's far from a joke. Well, they just say that the rate is so high, it's become a joke, basically. Does it just stop trade between Washington and Beijing altogether? Do you see a decoupling of these two economies? Well, maybe the trade minister has a different sense of humor. I do, but I don't see anything funny
• 09:00 - 09:30 about it. Do you see a decoupling, though, between Washington and Beijing? There doesn't have to be. There could be. There's a big deal to be done at some point. But look what is different with China. That is different in the history of trade that normally if you go back to the big trade deals or the currency deals in the eighties, the Plaza Accord, the Lulu record, the Reagan auto deals, we were are leading economic competitors
• 09:30 - 10:00 were our military allies. China is both our biggest economic competitor and our biggest military rival. So that's going to require a special kind of formula. Are you teasing out a Mar a Lago accord that we should be paying attention for in the future? I'm not sure what you're talking about, potentially getting all these trading partners together to discuss fair, balanced trade. Well, we're doing that over the next 90 days. Okay, So shifts in tariff policies has
• 10:00 - 10:30 had markets on edge. Even the president recently remarked that the bond market was, quote, queasy. Do you have a sense of who is dumping U.S. assets, who's been dumping U.S. Treasuries? I don't think there's a dumping. And I think we saw in the tech data either today or Friday that actually foreign ownerships picked up. We had to we had three big auctions last week. And on the longer an auction, ten tenure, 30 year, we saw increased foreign competition.
• 10:30 - 11:00 So I actually think this is one of those occasional VAR shocks that you get in the trading community. I think a lot of people got very leveraged maybe out over their skis. And then you combine that with some real money selling and you get these moves. So you don't think it's sovereigns, potentially it's hedge funds unwinding? I have no evidence that it's sovereigns. And look, Anne-Marie, the not you, but the nature of journalism is to create a
• 11:00 - 11:30 headline that the ten days ago when the ten year yields hit three nine, he said. Well, Secretary Bessant got what he wanted. He got ten year yields down, but it's the wrong reason. Now, I forget what they had on Friday, maybe 440 something. We saw a 50 basis move last week and ten year yield at the same time that the dollar was weakening nearly 3%. How do you simultaneously look at that
• 11:30 - 12:00 situation? It feels like investors are dumping U.S. assets. Well, look, I've learned that not to look at what happens there over a week. You know, I, for better or worse, have lived through a lot of these things. And in trading in one's personal trading history is the scar tissue that sticks with you the most. And I can tell you exactly where I was standing in 1998 when the long term capital, the debacle happened that had nothing to do with anything other than a
• 12:00 - 12:30 bunch of geniuses up in Greenwich who had too much leverage. So you're not concerned at this moment about the US dollar or the U.S. Treasury losing safe haven asset? No. Look, I still own global reserve currency. We are still a global reserve currency that the we have a strong dollar policy. The dollar can go up and down. If you go and look back at President Trump's first term, I don't remember the exact number, but the dollar in 2017
• 12:30 - 13:00 went down. I can't remember seven, eight, 9%. And then once the tax bill was done, took off, took off for for the remainder of his term. Have you spoken to the Fed at all about contingency plans, though, if financial stability risks flare up? Chair Powell and I have breakfast every week and we discuss a wide range of things. And, you know, our staffs are always in
• 13:00 - 13:30 contact. We have a market forum. They have a markets room. But, you know, and specifically, did we discuss some kind of a break the glass? I think we're a long way from that. So when was the last time you guys spoke? We had breakfast last week. We had breakfast last week. And it was an away game. I was over the Fed and no concern so far from the Fed chair and what he saw in the Treasury market. I think we would have heard the from the Fed chair. I think we heard from Governor Collins of Boston on Friday.
• 13:30 - 14:00 We heard from Governor Weller today on his thoughts on what tariffs mean. So seems like business as usual when it comes to the Fed chair. His term is up May 20, 26. So we're almost 12 months out from that. When are you going to start to think about having discussions with the president about who should lead the Fed? Well, we think about it all the time. I think when are we going to start interviewing candidates? And that will be sometime in the fall.
• 14:00 - 14:30 In the fall. So about six months lead time. The US Supreme Court recently came out with a ruling that the executive branch, the president for now could oust top officials at independent agencies, and that has some individuals in the market a little bit concerned about what this could mean for the independence of the Fed, which is really a cherished pillar of wanting to invest in America. Do you have any concern about potentially President Trump ousting Fed Chair Jay Powell or the independence of the Fed? Well, Anne-Marie, I have repeatedly said the Fed has two duties, and I believe that
• 14:30 - 15:00 monetary policy is a jewel box. It's got to be preserved. And then they have regulatory policies. And I think we can have more of a discussion because the Fed is one among three bank regulators, and there's the Fed Comptroller of the Currency and the FDIC. So I think it's very easy to delineate between those two. The moment. No concern.
• 15:00 - 15:30 No concern. When you talk to Fed Chair Jay Powell at the moment, doesn't sound like they feel like they need to step in on this unraveling we saw last week with the bond market. Does the Treasury have any plans to do something if this was to become more unnerving? Well, look, the Treasury has lots of lots of things we can do. And but again, I think we're a long way from that. But all options would be on the table. Sure. But but but again, we have a big tool kit that we can roll out.
• 15:30 - 16:00 We do regular off the run buybacks. We could up the buybacks if we wanted. So just finally, I want to get your thoughts on something you told me, John and Lisa, in February, which was that in your old world you would be that person with your ear against the door trying to understand what policymakers were doing so that you could predict where financial markets would go. In this moment, where we hear from top executives constantly.
• 16:00 - 16:30 Today, it was the Goldman Sachs CEO. Last week it was Jamie Dimon. And this uncertainty, especially around tariff policy, what advice would you be giving to your old self to to look at the whole policy? Because, you know, again, not you, but others in the media can pick one factor. So right now it's tariff, tariff, tariff. But we have you mentioned we have tax, tax tax coming up. We have deregulation, deregulation, deregulation.
• 16:30 - 17:00 So, you know, it's a mini the leg stool. And I would try to think about, you know, what's happening. The tariff sequencing was always going to be first, the tax bill is going very well. And I think I've been pleasantly surprised at how quickly that's moving along. And then deregulation, you know, from our area on the financial side and in the rest of the economy, that takes a little longer. But that will start kicking in September, October, in the fall. And those are going to be very powerful.
• 17:00 - 17:30 I believe he described as a three legged stool. And right now, everyone is focused on one part of that leg, and that's the tariffs, as you say, when it comes to the tax cuts right now, what the market is expecting and what could get done in Congress based on how slim the majority is for the Republicans is just an extension of current policy. I think that's wrong. I think that the underreported story in the media, the story this funded report doesn't get reported enough is a democratic chaos. But that the underreported story is the
• 17:30 - 18:00 remarkable Republican unity led by President Trump. Speaker Johnson on First Try, got instructions out of the House for the budget. He passed a clean C.R. First try. Senator Leader Thune pinned it back to the House very quickly with their instructions. And I had something along with Kevin Hassett had an NBC chair called the Big
• 18:00 - 18:30 Six, which also includes Leader Thune, Speaker Johnson, Senator Crapo, Committe, committee chair Jason Smith. And everyone's very aligned. And there going to be a lot more bells and whistles other than in to other than just changing the date on Tcja. So your pitch right now to financial market participants, to consumers is you need to see the entire picture. Well, you need to see the entire
• 18:30 - 19:00 picture. And it was President Trump said the other day, stay cool. It was my message when I was out with you on April 2nd, it was to the countries, these are maximum rates. So you ask if it was a maximalist strategy. If you don't elevate, this is your maximum rate, so don't elevate. You have in markets the upside barrier. You don't have unlimited risk and then come to us and we will negotiate in good
• 19:00 - 19:30 faith. Can you guarantee clarity in 90 days? I think clarity is the through the eye of the beholder. But I can guarantee you that we're going to run a robust process. And I think the market can take great comfort in that. So maybe some of that uncertainty starting to evaporate. Yeah, if we measure uncertainty by the VIX. I think that the VIX. I don't want to make market calls, but I
• 19:30 - 20:00 think the VIX spiked and is likely peaked.