U.S. Treasury Secretary Scott Bessent on Monday said President Donald Trump's tariff, tax-cut and deregulation agenda would work together to drive long-term investment to the U.S. economy, adding that U.S. financial markets were "anti-fragile" and would weather any short-term turbulence. Bessent, in prepared remarks to the Milken Institute Global Conference in Los Angeles, delivered a full-throated defense of Trump's tariffs but emphasized the Republican tax bill working its way through Congress, saying it would make many parts of the president's first-term tax cuts permanent, including a deduction for small businesses. "The primary components of the Trump economic agenda – trade, tax cuts, and deregulation – are not standalone policies.
They are interlocking parts of an engine designed to drive long-term investment in the American economy," Bessent said. Bessent said that Trump's tariff blitz since taking office for a second time on January 20 was engineered to encourage companies like those attending the conference to invest in the U.S., build factories and make products in the U.S. This effort would be rewarded with tax and deregulation benefits, Bessent said.
Trump's tax legislation would provide tax credits and deductions for research and innovation into high-tech operations, restore 100% expensing for equipment while expanding this benefit to new factory construction to accelerate investment, he added. "The result of the president's economic plan will be more. More jobs, more homes, more growth, more factories, more critical manufacturing plants, more semiconductors, more energy, more opportunity, more defense, more economic security, more innovation," Bessent said.
In a subsequent interview with CNBC television, Bessent said that he believed these policies could push U.S. growth close to 3% by this time next year, which would help to bring down U.S. budget deficits to their long-term average share of economic output. The U.S. economy contracted for the first time in three years in the first quarter amid a flood of imports to beat Trump's tariffs, and the International Monetary Fund has forecast that U.S. GDP will grow only 1.8% in 2025. GRADUALLY SHRINKING DEFICITS He said the "smart way" to cut deficits was to reduce them by about $300 billion per year, noting that is equivalent to about 1 percentage point of the nearly $30 trillion U.S. economy.
"We're talking about bringing the deficit down by about 100 basis points every year for four years, (to) get us back to the long-term average of 3.5%," he said, referring to percentages of GDP. "And then a big cure for the deficit is upward growth shock." He told the Milken conference that if deficit reduction can remove credit risk from U.S. Treasury debt, then interest rates "will naturally come down."
The Treasury chief said U.S. financial markets were well equipped to weather any short-term turbulence, citing their rebound from challenges over the past century, including the Great Depression, two World Wars, the September 11, 2001, attacks, the 2008-2009 global financial crisis, the COVID-19 pandemic and the subsequent surge in inflation. "Each time the American economy gets knocked down, it gets back up again. And it gets back up even stronger than it was before," Bessent said.
"U.S. markets are anti-fragile. Indeed, the entirety of our economic history can be distilled in just five words: 'Up and to the right.'"
