By David Lawder and Ann Saphir
NEW YORK (Reuters) -U.S. Treasury Secretary Scott Bessent on Thursday strongly defended the Trump administration’s campaign to tear up global trade norms with tariffs and vowed to roll back regulations on American banks and crush Iran’s economy with sanctions.
In his first major speech to Wall Street executives, Bessent declared that President Donald Trump has begun an “aggressive campaign to rebalance the international economic system.”
He said the decades-old trading system built around U.S.
demand soaking up the world’s exports is broken and unsustainable and tariffs will help fix it.
“Access to cheap goods is not the essence of the American dream,” Bessent told the Economic Club of New York.
“The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security.
For too long, the designers of multilateral trade deals have lost sight of this.”
Trump’s cascade of tariff actions over the past six weeks has whipsawed financial markets and prompted companies to pause some investment plans.
As Bessent spoke, Trump further dialed back his 25% tariffs on Canadian and Mexican goods, providing a one month exemption for any goods that meet the rules of origin under the U.S.-Mexico-Canada Agreement on trade.
But Bessent’s remarks did little to slow another sell-off on Wall Street, as worries over tariffs and consumer spending pushed down major indices, with the tech-heavy Nasdaq falling 2.6% into correction mode.
Interviewed on stage by former Trump economic advisor Larry Kudlow in front of an audience that included Blackstone CEO Stephen Schwarzman and GAMCO Investors CEO Mario Gabelli, Bessent – a hedge fund billionaire himself – warned that trading partners who retaliate will face even higher duties on their U.S.
exports, calling Canadian Prime Minister Justin Trudeau a “numbskull” for doing just that.
“As President Trump has said many times, tariff is his favorite word. I would say that reciprocal is probably his second favorite word,” Bessent said.
“If you want to be a numbskull like Justin Trudeau and say, ‘oh, we’re going to do this,’ then … tariffs are going to go up.
But if you want to sit back, have a discussion with the Commerce Department, USTR (U.S. Trade Representative) – they all have my phone number too – I am happy to have a discussion with our foreign counterpart.”
The U.S.
has promised reciprocal tariffs starting April 2. Bessent said tariffs would deliver benefits on a number of fronts, including to lower-income families who stand to be hardest hit by the higher prices the levies will bring.
Far from being a regressive tax, he said, the “substantial” revenue from tariffs will help pay for tax cuts for earners in the bottom 50%, such as no taxes on tips.
‘MAXIMUM’ SANCTIONS
Bessent said the U.S.
Treasury would no longer apply “lackadaisical” sanctions that create opportunities for circumvention. Going forward, he said U.S. sanctions would be used “explicitly and aggressively for immediate maximum impact.”
He called former president Joe Biden’s sanctions on Russian energy “egregiously weak,” saying they allowed Russia to continue financing its war in Ukraine.
He added that Biden’s last-minute sanctions on the Russian oil and gas sectors in January were done for political purposes, but Bessent did not mention any plans to review them.
“This administration has kept the enhanced sanctions in place and will not hesitate to go ‘all in’ should it provide leverage in peace negotiations,” Bessent said.
Regarding Iran, he said the Treasury was imposing a “maximum pressure” campaign of sanctions to choke off its oil exports and put pressure on its currency.
“We are going to shut down Iran’s oil sector and drone manufacturing capabilities,” Bessent said. “Making Iran broke again will mark the beginning of our updated sanctions policy.”
UNLOCKING MORE LOANS
Bessent also said the Treasury would lead a “comprehensive and assertive effort” to enable banks to boost the U.S.
economy. A top priority in that effort will be a “fundamental refocusing” of how the nation’s regulators supervise its banks.
The banking industry has long complained current bank supervision is opaque, subjective, and needlessly restrictive, and Bessent echoed those concerns, saying bank supervisors should be focused on “material financial risk rather than box-checking.”
Specifically, Bessent said he planned to utilize multi-agency bodies like the Financial Stability Oversight Council to steer a unified regulatory approach, and noted a recent Trump executive order gave the administration direct oversight over independent agency rule-writing.
Notably, Bessent appeared to rule out consolidation of existing bank regulators, which had been rumored to be under consideration by the Trump administration, when discussing how they should operate in unison.
“To be clear, this does not mean consolidation of agencies, but coordination via Treasury, such that our regulators work in parallel with each other and industry,” he said.
Bessent singled out the supplementary leverage ratio (SLR), which requires banks to reserve capital regardless of how much risk is on their books, as a matter requiring review.
He stopped short of endorsing any particular fix, but noted the SLR should serve as a backstop, and not bind bank activities by forcing them to hold capital against safe assets like U.S. Treasury bonds or central bank reserves.
(Reporting by David Lawder, Pete Schroeder and Lananh Nguyen; Writing by Ann Saphir; Editing by Paul Simao and Sonali Paul)
