Treasury Secretary Nominee Says Three Kinds of Tariffs Will Be Levied

Bessent, who was testifying at a hearing Jan. 16, was responding to a question from Sen. Todd Young, R-Ind., who told him that temporary tariffs, used in moderation, can strengthen America's negotiating leverage, "but overuse of tariffs can inflate costs and provoke trade retaliation." Young said farmers tend to bear the brunt of that retaliation.

Bessent reassured him that Trump knows that 90% of rural voters chose him, and he said, "They should know, their interests are his interests." He added that if he were confirmed, he "would begin pushing for the purchase guarantees that were in the China [phase one] agreement to be enforced." He said he might push for a "catch-up provision" for the purchases China didn't make.

But, in terms of how Trump will use executive tariff authority, he advised Americans should think about three categories. One is "for remedying unfair trade practices," whether at the industry level or for a country. This description could cover both traditional trade remedies, Section 232 tariffs on aluminum and steel imposed by Trump in 2018 during his first presidency and Section 301 tariffs on China imposed by both Trump and his successor Joe Biden.

Two would be "more generalized tariffs as a revenue raiser for the federal budget." Bessent didn't say what an appropriate level for those tariffs would be. Tariff collections made up 2.4% of federal revenue in FY 2024.

Three could be a negotiating tactic to achieve unrelated policy aims, he said, as Trump feels sanctions are overused and could contribute to the dollar losing its dominance as the world's reserve currency. He gave the 25% tariff threat against Mexico over fentanyl smuggling as an example.

Several Democrats, including the committee's ranking member, Sen. Ron Wyden, D-Ore., argued that blanket tariffs would only raise prices, especially for those with more modest incomes. Bessent pushed back, saying if a 10% tariff were to be imposed, the dollar would appreciate by 4%, and customers may buy less of what has become more expensive due to tariffs. "And finally, foreign manufacturers," especially China, "which is trying to export their way out of their current economic malaise, they will continue cutting prices to maintain market share," he said.

The stock market seemed to think Bessent would be moderate on tariffs (see 2411250033), since he said his advice would be to gradually raise rates. That approach, according to Bloomberg, is currently being discussed among Trump's economic team.

But when Sen. Maria Cantwell, D-Wash., pushed him to endorse free trade as an engine for economic growth, he name-checked Boeing -- he lives in Charleston, where it is also a major employer -- but echoed a populist line.

"I agree with you that opening markets is good, but the free trade must also be balanced against fair trade. And clearly, what has happened is: the trade has not been fair. That has fallen on the American workers."

He said China has 4% disinflation and is either in a severe recession, or even an economic depression. "And they are attempting to export their way out of that. ... I am with you on the need to open markets, but we cannot allow a player like this to flood our markets or to flood the world."

Moreover, when pressed by Independent Sen. Bernie Sanders on a Trumpian policy that he would be unlikely to believe was wise -- capping credit card interest at 10% -- Bessent said: "When President Trump takes office, and if I am confirmed, I will follow what President Trump wants to do."

Sen. Bill Cassidy, R-La., asked Bessent if he could support a carbon tax on imports, as Cassidy has proposed. Bessent expressed openness. "I look forward to working with him on various strategies, some that could be specifically aimed toward carbon, as you say, others that could be aimed toward unfair trade practices, unfair financing practices."