Compiled by Waiwai Y.

Guest: Scott Bessent, Treasury Secretary

Host: Tucker Carlson

Podcast Source:Tucker Carlson

Original Title: Treasury Secretary Scott Bessent Breaks Down Trump's Tariff Plan and Its Impact on the Middle Class

Air Date: 5 April, 2025

Highlights

Treasury Secretary Scott Bessent explains the administration's new tariffs, and why we had to do something to stop the slide.

Highlights of Key Insights

• Wall Street has done great, but it's Main Street's turn. That's what we saw yesterday—it. It's Main Street's turn.

• It's crucial for monetary policy that they remain independent.

• The ultimate goal of tariffs is to encourage manufacturers to bring their factories to the US. Over time, we'll have substantial tariff income initially.

• Only President Trump or I should speak about the US dollar policy.

• Life expectancy has declined. They don't think their children will do better than they are. A lot of people don't care, but President Trump cares. This is the first step towards realigning that.

• We're lowering spending levels, not eliminating government efficiency.

• We’re hailing cabs in an Uber economy. Why can’t the government adapt to the gig economy?

• The relationship between President Trump and Chairman Xi gives me confidence. With direct communication at the top, it's hard for things to go haywire.

• These people just want to live a better life, hoping their communities improve, and their children have a brighter future than themselves.

• The original tariff man was Alexander Hamilton, who used tariffs to fund the new nation and protect American industry. President Trump has added a third leg to the stool by using tariffs to negotiate.

• As Warren Buffett says, in the short term, the market is a voting machine, but in the long term, it's a weighing machine. It evaluates whether we have good policies. While market declines are often attributed to the president's economic policies, this recent decline started with the Chinese AI announcement of DeepSeek.

• The Democrats have a strategy called "compensate the loser," but I don't think the bottom 50% of Americans are losers; the system has failed them. We need to fix the system, provide them with good job opportunities, help their children do better, and reduce their debt burden.

Trump’s Tariff Plan

Tucker:

The Treasury Department president had a press conference yesterday announcing a whole new global tariff regime. It was clearly his intent all along, but it did rattle people, including some of his supporters. Where do you think this leads?

Scott Bessent:

Thank you for having me. The president's been talking about this for four decades. This is transformational for the American economy, the American worker, and the new Republican alignment. It's a combination of old and new ideas. The original tariff man was Alexander Hamilton, who used tariffs to fund the new nation and protect American industry. President Trump has added a third leg to the stool by using tariffs to negotiate.

I was a freshman in college when Ronald Reagan came in 1980. It was a new day in America. People look back fondly at the Reagan years, but it was choppy. President Reagan stood the course. At one point, a farmer showed up with a shotgun at the Federal Reserve to kill Paul Volker for raising rates. It was a tough time. In 1984, President Reagan won reelection with 49 states.

That's what President Trump is doing now. For years, the American worker and middle class have been eviscerated. We're just starting to see research on the China shock from 2004, which shows American workers never recovered. President Trump sensed it 40 years ago. On the campaign trail, he promised American workers that the old standard of living can come back. We've seen massive distributional problems where the coasts have done great, and the middle of the country has declined.

Life expectancy has declined. They don't think their children will do better than they are. A lot of people don't care, but President Trump cares. This is the first step towards realigning that. Some of our trading partners, including allies, have not been good partners. If tariffs are so bad, why do they have them?

If the American consumer is going to pay all the tariff, why do they care about tariffs? This is the beginning of a process to reindustrialize. We've gone to a highly financialized economy and stopped making things, especially those relevant for national security. One good outcome from Covid was it woke the world up to supply chain problems. Economic security is national security. President Trump and I have talked about that a lot.

This is a national security issue, but also an economic security issue. It's to give working Americans real wage gains and enhance their lives. I've said on the campaign trail that Wall Street has done great, but it's Main Street's turn. That's what we saw yesterday—it. It's Main Street's turn.

The Current State of the Stock Market

Tucker: Over my lifetime, Wall Street has been seen as a measure of economic health. If the stock market falls, many view it as a sign of economic decline. Do you think that's fair?

Scott Bessent:

The market fluctuates. As Warren Buffett says, in the short term, the market is a voting machine, but in the long term, it's a weighing machine. It evaluates whether we have good policies. While market declines are often attributed to the president's economic policies, this recent decline started with the Chinese AI announcement of DeepSeek.

The so-called "Magnificent Seven" tech stocks had driven the market for 18 months, but AI-related stocks have since faced a reality check. The current market issue is more about these tech stocks than a broader economic problem. For example, even with today's moves, the equal-weighted S&P is only down 4% for the year—barely noticeable on a long-term chart.

Tucker: So the market, especially tech stocks, is reflecting a real valuation adjustment?

Scott Bessent:

Yes, it's partly that. But the most important thing we can do is focus on sound economic fundamentals. President Trump and I prioritize stable taxes, predictable business environments, cheap and plentiful energy, deregulation, and treating the workforce well. With these fundamentals in place, the stock market will thrive in the long run.

Will Americans See Substantial Tax Cuts Because of Tariffs?

Tucker: The president suggested in describing his plan for tariffs that you could conceivably fund a lot of government with tariffs, which would suggest that taxpayers fund less. Do you expect these will be accompanied by a congressionally approved tax cut for the middle class?

Scott Bessent:

One of the things that the tariffs are doing is pushing back against other economic systems. For example, China has a very different economic system with low-cost labor and subsidized industries. With the tariff income, it can be substantial. A classical model of tariff income might suggest that if there's a 10% tariff, the currency would appreciate about 4%, with the producer in the other country absorbing 4%, and the US consumer might face a one-time price adjustment of 2%. We saw a study from MIT showing that with President Trump's first China tariffs, which were approximately 20%, the price level went up 0.7%.

If we could implement a 20% tariff and have foreigners pay it, using that money to reduce our government deficit and keep taxes low, that's a unique formula not tried in this country for a long time. It would require congressional participation to adjust tax rates since they are set by Congress.

Currently, we're in a situation between tariff income and government expense cutting. CBO scoring, which I was involved with for 35 years, often doesn't reflect reality. The Congressional Budget Office uses a ten-year window and assumes a constant economic growth rate, which doesn't change with tax adjustments. During the campaign, Vice President Harris's proposed tax increases were scored favorably by the CBO, while President Trump’s 2017 tax cuts were seen as costly due to expected growth increases.

We won't get credit for tariffs in any bill because Congress isn't legislating it; the president is using executive authority. We've already taken in hundreds of millions from China tariffs, about $35 billion a year from old tariffs. In the CBO window, that's around $350 billion, covering many of the president's promises like no tax on tips, Social Security, or overtime, and making interest on US-made autos deductible. This approach benefits the bottom 50% of wage earners, who will gain from these programs.

How Much Money Will America Make Through Tariffs?

Tucker: Looking at a year from now, do you have any sense of how much the US government anticipates bringing in from the tariffs announced yesterday?

Scott Bessent:

It's going to be variable, but it could be anywhere from $300 billion to $600 billion a year.

Tucker: Okay, so that's meaningful revenue.

Scott Bessent:

Very meaningful. The ultimate goal of the tariffs is to encourage manufacturers to bring their factories to the US. Over time, we'll have substantial tariff income initially. As manufacturers build their factories here, tariffs will drop, but revenue from the factories and income taxes from new jobs will increase. We'll be taking in revenue domestically as tariffs drop because we're producing here and reducing our trade deficit.

Bringing Manufacturing Back to the US

Tucker: Do you think the United States has the necessary labor force for this transition?

Scott Bessent:

I think we do. With AI and automation, many new factories will be smart factories. We have the labor force needed. On the other side, I'm concerned about an impending financial calamity due to high levels of government spending. The president is reordering trade and shedding excess labor in the federal government, which will provide the labor needed for new manufacturing. We're aiming to rightsize the federal government and unleash the private sector, which has been restrained by excessive regulation.

Tucker: There are many unknown factors, like illegal immigration, AI's impact on labor markets, tariffs, and global reactions. Do you find it hard to predict what's going to happen?

Scott Bessent: It's challenging, and while you can never be 100% sure, you can stay within certain guardrails and move forward. I can't guarantee there won't be a recession, but I believe this approach will work, much like President Reagan believed in supply-side economics. The old system wasn't working, and sometimes you have to be brave to change it. Continuing to issue debt and create government jobs would have been easy but could lead to a calamity.

Tucker: Do you think this administration will get credit for avoiding a financial calamity?

Scott Bessent:

Probably not, but avoiding a crisis is significant. It's like reinforcing doors on airplanes before a crash happens. We're making necessary changes to prevent future problems.

Tariff Pushback From Foreign Countries

Tucker: What will the lobbying scramble by foreign governments be like over the next three months? The president announced a universal tariff, but each country is adjusted based on factors like trade deficit and currency manipulation. Countries like Vietnam and China will likely pressure the administration to adjust those numbers. What's that going to be like?

Scott Bessent:

It will ultimately be the president's decision. His view is that this has been an ongoing issue with both friends and foes, and we'll see how it plays out. More important than discussions with countries will be discussions with companies. As President Trump said, the best way to avoid tariffs is to build your factory here.

We're working at the Treasury to help with this by pushing for tax reforms to guarantee low taxes and full depreciation within the first year. We're collaborating on energy security and reducing regulations. For example, with Taiwan Semiconductor Manufacturing Company, we're working to expedite permits because the regulatory process has become too slow in the US. The focus will likely be on individual company announcements rather than country announcements.

Will China Retaliate?

Tucker: If you want to sell to Americans, you have to make it in America or pay the tariff. This is a big challenge for China, more than any other country. How will they respond? What does their retaliation look like?

Scott Bessent:

I'm not sure they can retaliate for a couple of reasons. Historically, we're the debtor nation with trade deficits, which puts the surplus nation, like China, in a weaker position. The Chinese business model is the most imbalanced in modern history, heavily reliant on exports. They're trying to export their way out of a deflationary recession, and we can't let them do that. Their manufacturing system is like the brooms carrying buckets in the old Disney movie—it's their business model.

Tucker: What's the dream scenario?

Scott Bessent:

Ideally, there could be a deal where the US and China rebalance. We want more manufacturing, which means less consumption. China has too much manufacturing, and their consumers get the short end of the stick. If they consume more and manufacture less, and we do the opposite, it would level the playing field economically, even if we remain military rivals. This won't happen immediately, but over the next few years, they may have to adapt because their business model is broken.

Tucker: You're describing the scenario where if you owe a bank a lot, you're in charge of the bank.

Scott Bessent:

Exactly. They have a big deficit with us and need our markets. They can't survive without them.

Tucker: Are you confident there's a clear channel of communication between the two governments?

Scott Bessent:

Yes, the relationship between President Trump and Chairman Xi gives me confidence. With direct communication at the top, it's hard for things to go haywire.

How Will Europe Be Impacted?

Tucker: What about the rest of the world? What about Europe?

Scott Bessent:

Looking back, there was a famous meeting where President Trump told Europeans, "You're insane for building Nord Stream 2. What are you doing? You're already getting most of your energy from Russia, and now you're doubling down." They did, and someone blew it up. But Europeans, although reluctant, will have to rebalance. Germany, as a very imbalanced export economy, faces the risk of deindustrialization. They are the opposite of us, with high energy costs. They've relied on Italy and southern countries to keep the euro suppressed, and they've been selling to China, which is now becoming their competitor.

Tucker: The situation you described reminds me of President Reagan's first term. 1980 was a major turning point, with the recession successfully controlled between 1980 and 1982, followed by a historic victory in 1984. Do you think similar results can be achieved in four years?

Scott Bessent:

Yes, the only difference is that while competition was fierce back then, it was more civil. The real danger now is that if the midterm elections are lost, it could trigger a series of political battles, like impeaching the president, which would make the public weary of politics again. Einstein's definition of insanity is doing the same thing over and over and expecting different results.

Tucker: Do you think the current situation in the U.S. is really bad? Driving across America, you see declining living standards in many places. People hope new policies will bring significant improvements in four years. Do you think this is achievable?

Scott Bessent:

I believe it's possible. Our previous methods clearly weren't working, so we must try new strategies. I am confident in the effectiveness of this approach. For example, President Trump's tariff policies were thought to harm American workers, but in fact, their economic performance surpassed that of the management. The net worth of the bottom 50% of households grew faster than the top 10%. However, wealth distribution remains severely imbalanced, with the top 10% owning 88% of the stock market, while the bottom 50% are burdened with debt. We must help these families alleviate economic pressure.

I noticed two thought-provoking statistics: In the summer of 2024, the number of Americans vacationing in Europe reached a record high, while food bank usage also hit a record high. I visited two food banks near my hometown, and they told me more working families are seeking help because they can't afford weekly groceries. These families aren't homeless or on the streets; they're ordinary working families who just can't afford basic living expenses.

But they observed a new phenomenon: it wasn't their traditional clientele, not people who lost their homes or were on the streets. These were working families who could no longer afford $100 a week at the grocery store. They were missing five, six, seven items each week, so they came to the food bank to top up. Thus, it's not a great record: record European vacations, record food bank usage.

We can continue setting new records for European vacations, but we must also take care of those in need. They don't want handouts. The Democrats have a strategy called "compensate the loser," but I don't think the bottom 50% of Americans are losers; the system has failed them. We need to fix the system, provide them with good job opportunities, help their children do better, and reduce their debt burden. This isn't hard to achieve, and I believe we can do it in the next four years.

Is the Upper Class Out of Touch With the Lower and Middle Class?

Tucker: You grew up in a middle-class and working-class family background, but now you're very successful and have long lived among the wealthy. In such an environment, do you feel that the upper class is concerned about the real state of the country? For example, do people say, "I just drove 100 miles and found that things aren't as optimistic as imagined; people's lives aren't as good"? Does this kind of discussion exist, or in reality, does no one care about these issues?

Scott Bessent: Frankly, sometimes there is indeed a sense of disconnect. For instance, if my private jet is delayed by an hour, my day's plans are disrupted. You can't imagine, "Oh my gosh, I still need to find a new charger." These issues might seem trivial in wealthy circles but often become their main complaints.

However, I am very sensitive to the social situation in America because my family was once very wealthy. We were early settlers, and the family wealth lasted for about 250 years. However, my father made many poor financial decisions, and eventually, we lost all our wealth. When I was born, our family was still considered affluent for the first few years, but then everything vanished.

I have personally experienced this transition. I know what economic insecurity feels like. I believe no one should go through such difficulties. As long as people are willing to work hard, they should have the opportunity to live a better life.

People are willing to put in the effort. Now, going back to President Trump's campaign, I was involved in it. I remember one of the most touching things was attending the last two campaign stops. One was in Pittsburgh, and the other was in Grand Rapids, Michigan.

When I walked into the venue, I saw many union workers and steelworkers, wearing hard hats and work clothes, bringing their children to the event. These people just want to live a better life, hoping their communities improve, and their children have a brighter future than themselves. They don't care about the luxury on Madison Avenue or know about the new high-end restaurant in Paris.

President Trump successfully united these ordinary workers with the world's wealthiest people, like Elon Musk, forming an incredible alliance. I think it's very unique and remarkable.

Bessent’s Biggest Worries

Tucker: What do you worry about as Treasury Secretary?

Scott Bessent:

In my career, my strong point was risk management. With our economic and fiscal house in order, I think I'll have a better story to tell. I worry about another outbreak or a kinetic war. I try to create a situation where I can worry less each day.

I was confirmed on January 28th. The ten-year interest rate almost spiked to 5%, which is uncomfortable for the economy and the Treasury. We have a tremendous amount of debt to roll, and I worry about not making smart cuts or focusing on waste, fraud, and abuse.

I also worry that the tax bill could get bogged down, leading to the largest tax increase in history. Geopolitical issues like Iran, Taiwan, or tensions between Russia and Ukraine are concerns as well.

We are improving our fiscal situation with tariff revenue and cutting expenses. The ten-year bond rate has dropped from nearly 5% to around 4%, saving about $100 billion. We're setting the stage for a better fiscal time.

If we can reduce spending, it would be exciting. No one has seriously considered this, including President Reagan. We're lowering spending levels, not eliminating government efficiency.

I've lived in New York and Florida. Both states have similar populations, but New York's budget is $235 billion, while Florida's is $125 billion, with no income tax and more efficient public services. I wonder if we can make the rest of America more like Florida rather than New York.

The Long Term Benefits of DOGE

Tucker: So do you think after four years we will see an actual net reduction in government spending, thanks to DOGE?

Scott Bessent:

Inflation adjusted.

Tucker: Yes. How long does Elon stay involved?

Scott Bessent:

I don’t know about the day-to-day, but I think his imprint will be with us for a long time. The mainstream media has tried to demonize DOGE and the people working with him. For example, there are Treasury and IRS employees I hired, like Tom Krause. He was on TV recently with Brett Baier.

He’s done $100 billion of tech mergers. If I were still in investment, I would’ve hired him, but I couldn’t afford him. He’s doing this for the good of the country. He came in, ignored the misinformation spread by outlets like the Washington Post, analyzed the system, and within six weeks identified all its vulnerabilities.

There’s also Sam Kirkus, who appeared with me on Laura Ingraham’s show. That was my idea—to bring him out of the shadows and stop the demonization. He’s a young man, owns one pair of pants, and is proud to tell everyone that. You or I would be thrilled if our daughter brought him home. He’s a patriot, hardworking, and analytical. He’s uncovered major issues in the IRS tech systems.

Elon wears a shirt under his jacket that says “Tech Support.” That’s what we’re getting. Right now, we have a blockbuster-style government when we should be on Netflix. We’re hailing cabs in an Uber economy. Why can’t the government adapt to the gig economy?

The Corruption of the Federal Reserve

Tucker: Who exactly runs the Federal Reserve? It seems like a pivotal institution with the most direct effect on markets, yet it appears outside of political control.

Scott Bessent:

During my confirmation hearing, I was at a dinner with Jerome Powell. I said I'd only talk about the Fed's past mistakes and the ones we'll make in the future. It's crucial for monetary policy that they remain independent. However, their involvement in regulation, climate, and other areas could make them vulnerable. They should focus on monetary policy to benefit the American economy and keep inflation low. Other banking agencies can handle the rest.

Tucker: So the Fed controls the weather now? What were they doing with climate?

Scott Bessent:

The Treasury Secretary chairs the Financial Stability Oversight Council, which includes all financial regulators. Two weeks before Silicon Valley Bank went under, they issued a report saying climate was the biggest risk to the financial system—not the issues with a large bank in California. Climate has been a distraction. The regulators failed, which frustrates people. It's common sense; if you have deposits that could quickly leave your bank, you shouldn't hold long-term assets. But they were too focused on climate. There was also regulatory capture; the CEO of Silicon Valley Bank was on the San Francisco Federal Reserve board, which complicates regulation.

Why Gold Is So Critical Right Now

Tucker: Why is gold moving around the world in such huge quantities right now?

Scott Bessent:

A couple of reasons. Physically, it's moving due to potential tariffs. There was uncertainty about whether gold would be exempt from tariffs, which led to a big move from vaults in Switzerland and London to New York. Gold has historically been a store of value, similar to how Bitcoin is becoming one. A significant demand for gold is coming from China, where economic issues and capital controls make people distrust the currency. Many Chinese want to move their money out, and buying gold is one way to do that.

Tucker: Even in 2025, when everything is digital, gold is still seen as a reliable store of value. Why?

Scott Bessent:

Gold has a lot of historical significance. For instance, during Russia's financial crisis in 1998, a friend's grandmother bought bicycles as a store of value. Gold also has applications in jewelry, especially in India. It's something people globally agree on. Gold can't have fiscal problems, budget deficits, or wars, making it an isolated and stable asset. The global trading system was once tied to gold until Nixon changed that.

Tucker: So you're not anti-gold?

Scott Bessent:

No, not at all. When I had my fund, some might have even called me a gold bug.

Zelensky's Self-Sabotaging Negotiation Tactics

Tucker: How did you end up interacting with Zelensky?

Scott Bessent: The President asked me to lead the economic agreement as part of his peace plan. It was well-sequenced: signing a deal with Ukraine would strengthen US-Ukraine ties, show Russia we're committed, and demonstrate to Americans that we have an economic stake, not just grants. I insisted on presenting the agreement in Kyiv to Zelensky. Despite suggestions to meet elsewhere, I went to Kyiv. Interestingly, the Russians bombed Kyiv just before my arrival, showing their disapproval of the deal.

Tucker: What happened with the deal?

Scott Bessent:

Zelensky was initially open to signing, but there was a lot of back and forth. He didn't sign it in Munich as promised. He came to the US, but the deal wasn't finalized. Despite being in a precarious position, he acted arrogantly, possibly due to pressure and poor advice from some advisors. The agreement was designed to benefit both Americans and Ukrainians, unlike exploitative deals seen elsewhere. It regulated money flow, which some didn't like.

Tucker: Are we ever going to get an audit of where all our billions went?

Scott Bessent:

I focus on looking forward. If this deal works, the money spent could be seen as minor. When the Iron Curtain fell, Ukraine and Poland had similar economies. Now, Poland is much larger. With US assistance and the peace deal, Ukraine could have a better future.

The Trump Administration’s Messaging About the Economy

Tucker: How do you keep message discipline in an administration, especially with new policies like tariffs?

Scott Bessent:

We follow President Trump's lead. We had meetings to align our messaging, and he's his own best spokesman. We support his vision, and if you're not on board, you shouldn't be here.

Tucker: Do you choose who should communicate to reassure markets?

Scott Bessent:

Only President Trump or I should speak about the US dollar policy. We have a strong dollar policy with solid economic fundamentals. While short-term fluctuations happen, we're focused on long-term strength, benefiting the American people.