(Bloomberg) — Scott Bessent, the veteran hedge fund manager whom Donald Trump has picked to be the next Treasury secretary, wants tariffs, a shadow chairman for the Federal Reserve and perhaps a weaker dollar.
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If confirmed by the Senate, he will have a broad mandate: overseeing government financing, economic sanctions and the Internal Revenue Service; engage in international economic diplomacy; and help ensure the smooth functioning of financial markets. Bessent, who currently runs macro hedge fund Key Square Group LP, will be key to implementing the president-elect’s agenda, which includes renewing some of Trump’s 2017 tax cuts set to expire next year and easing the financial regulations.
Below is a look at what Bessent has said over the past year about policies that will impact the U.S. economy.
Federal Reserve
Trump has said a president should have some say over interest rates and monetary policy, a move that would undermine the central bank’s long-standing independence from the executive branch. Bessent does not appear to disagree with Trump and even criticized the Fed itself in September after the major interest rate cut.
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“If you were concerned about the integrity of the institution, you wouldn’t have done it. You especially wouldn’t have done a jumbo cut. Reputation-wise, it’s all optics… tell me on what planet it’s conceivable that a two-month wait is a make-or-break issue versus the integrity of the institution.” – Bloomberg News, October 11
Bessent will also have a hand in helping Trump choose a replacement for Fed Chairman Jerome Powell when his term ends in May 2026, and at least three other appointments to the board over the next four years. Trump has flirted with the idea of firing Powell before, but Bessent has suggested a new idea.
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“You could make the first Fed nomination and create a shadow chairman of the Fed. And based on the concept of forward guidance, no one will care what Jerome Powell has to say anymore.” – Barron’s interview, October 9.
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“If you believe that forward guidance is good, why can’t you provide forward guidance on who will become the chairman of the Fed? You could do two things: The current Fed chairman could be reappointed, so you’ve created a path to that. Or the new candidate for Fed chairman would provide direction beyond the expiration date of the current Fed chairman.” — Bloomberg Radio on October 11.
Rates
Trump has promised to impose massive new tariffs, envisioning a levy of 10% to 20% on all foreign goods and 60% or higher on goods from China. During his campaign, he also threatened even higher tariffs on specific countries and products.
Although Bessent has sometimes suggested that Trump is signaling a maximalist approach as a negotiating tactic, he signaled strong support for tariffs in a Nov. 15 op-ed for Fox News.
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“For too long, conventional wisdom has rejected the use of tariffs as a tool of both economic and foreign policy. But like Alexander Hamilton, we should not be afraid to use the power of tariffs to improve the living standards of American families and businesses.”
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“Tariffs are also a useful tool to achieve the president’s foreign policy goals. Whether it’s pushing allies to spend more on their own defense, opening foreign markets to U.S. exports, securing cooperation in ending illegal immigration and banning the fentanyl trade, or deterring of military aggression: tariffs can play a central role.”
Markets
Finance ministers have traditionally refrained from attributing market gains to the work of their bosses, because that would mean taking the blame for a downturn – not to mention the fact that stocks, currencies – and bond markets move for often unrelated and even inexplicable reasons. But when markets rise, Trump enjoys a show-off. In a Nov. 11 op-ed in the Wall Street Journal under the headline “Markets are happy with Trump’s economy,” Bessent did Trump’s job.
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“Asset prices are volatile and long-term economic performance is the ultimate measure. But the past few days prove the markets’ unequivocal embrace of Trump 2.0’s economic vision. Markets are signaling expectations of higher growth, lower volatility and inflation, and a revitalized economy for all Americans.”
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“The rally in stocks was particularly unusual as interest rates also moved higher. The combination of the steepening yield curve, stable inflation expectations and the rise in stock prices indicates that markets expect the Trump agenda to promote non-inflationary growth that will boost private investment.”
Dollar policy
It is no secret that Trump is enamored with the role of the dollar as a reserve asset in the world, and with the economic and geopolitical power that comes with it. But he also wants the exchange rate to be weak enough to support America’s manufacturing sector. The warring forces could become a pillar of his administration’s economic agenda, and as head of the Treasury Department, Bessent will oversee U.S. currency policy.
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“The reserve currency can go up and down based on the market. I believe that if you have good economic policies, of course you will have a strong dollar.” – October 13 interview in Financial Times
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“It’s a market reaction and he understands that tariffs cause a stronger dollar, so a weaker dollar with tariffs is an economic abnormality. We could see what is called the dollar smile. What we have now is high interest rates, a high deficit and above-target inflation. If you get inflation down… interest rates could fall, and you would get a market-based depreciation of the dollar. But in terms of a dollar policy that is too weak, I would not expect that at all.” – November 5 Bloomberg TV interview
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“Trump’s election resulted in the largest single-day rise in the US dollar in more than two years, and the third largest in the past decade. This is a vote of confidence in US international leadership and in the dollar as the world’s reserve currency.” – November 11 op-ed in the Wall Street Journal
Debts and taxes
Bessent will also oversee management of the government’s nearly $29 trillion debt pile. He says Trump will aim to reduce the federal budget deficit to 3% of gross domestic product, from about 6.2% at the end of the last budget year.
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“I think we’re going to do this through deregulation, energy dominance and reprivatizing the economy… I think shutting down the economy will be a priority. [Inflation Reduction Act] … I don’t think anyone will have a problem with slowing down or shutting down this IRA.” – November 6 interview with CNBC
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Issuing ultra-long-term bonds “would have been a great idea,” Bessent said in a Bloomberg interview on June 7. “If rates are very low, you have to extend the term,” he said. “I think it is very unfortunate what Secretary Yellen is doing. She’s financing on the front end, and she’s betting on the carry trade, which is not good risk management.”
Bessent will also play a key role in guiding the extension of Trump’s signature 2017 tax cuts, many of which are set to expire in 2025.
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“I have already had conversations with many of the Republicans who will chair these committees and I can tell you that in the Republican Congress, especially in the House of Representatives, there is a great appetite for rewards. So it will be a negotiation.” – November 6 CNBC interview
–With help from Saleha Mohsin.
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