Treasury Secretary Scott Bessent appears to have emerged as a leading moderate voice on trade.Credit…Doug Mills/The New York Times
Trump’s sustainability problem
Business leaders and investors have warned for weeks that President Trump’s trade war is unsustainable, and that his recent attacks on the Fed risk market chaos.
Trump appears to be getting the message, to markets’ delight. But what does that mean for the president’s agenda, and for the economy?
Global stocks are rebounding on Wednesday after Trump retreated on two major points:
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He said he did not plan to fire Jay Powell, despite repeatedly threatening the Fed chair over his outlook for interest rate cuts. (Powell has said he can’t legally be fired.) Trump still weighed in on borrowing costs Tuesday — “it’s a perfect time to lower the rate,” he said.
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Trump said he was ready to play “very nice” in negotiations with China, which is high on his tariffs hit list.
Is Trump seeking an off-ramp from his trade fight? He admitted that his 145 percent levy on Chinese imports was steep. “It will come down substantially but it won’t be zero,” he said.
Perhaps he’s listening to moderate voices in his camp, including Scott Bessent. The Treasury secretary told investors at a JPMorgan Chase conference on Tuesday that the trade war with Beijing was unsustainable, and that both sides would need to de-escalate, according to Bloomberg.
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That seems to be driven by a consistent message from the markets. U.S. financial assets have sold off recently, wiping out trillions of dollars in market value, whenever he threatens tariffs or lashes out at the Fed. The selling tends to ease whenever the administration eases off.
Even supporters want results from Trump’s hard-nosed approach. The president came into office promising quick wins — including peace in Ukraine, defeating inflation and wiping out the trade deficit — but has little to show for it. His yo-yoing tariffs moves have paralyzed businesses, and the I.M.F. now forecasts that it will wipe out a chunk of global growth this year.
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