President-elect Donald Trump’s pick to run the Treasury Department does not expect the incoming president’s proposed tariffs to drive up inflation and says he is looking forward to helping extend the Trump tax cuts.
Longtime investor and hedge fund manager Scott Bessent sat before the Senate Finance Committee for a confirmation hearing Thursday to discuss his economic and national security plans for the Treasury Department once Trump returns to power.
Senator Ron Wyden (D., Ore.) asked Bessent whether he believes Trump’s proposal for across the board tariffs would increase prices on American consumers and business owners.
“Traditionally, the currency appreciates by 4 percent, so the 10 percent is not passed through. Then, we have very elasticities, consumer preferences may change. And finally, foreign manufacturers, especially China, which is trying to export their way out of their current economic malaise, will continue cutting prices to maintain market share,” Bessent said, addressing a scenario where Trump raises tariffs to 10 percent on American imports.
Wyden chided Bessent for taking an academic approach to tariffs before switching the subject to tax policy and whether wages should be treated differently from wealth. Bessent replied that every tax code will have tradeoffs and distortions that benefit certain financial gains.
Bessent later expressed openness to a carbon tariff and suggested that Democrats could be in favor of tariffs that address negative externalities such as carbon and unfair trade practices. He did so when Senator Bill Cassidy (R., La.) raised the issue in connection with China manipulating environmental standards.
Senator Todd Young (R., Ind.) questioned Bessent on the distinction between selective tariffs and overusing tariffs in ways that lead to retaliatory measures and harm farmers in his state. Bessent said the Trump administration will look out for farmers’ interests and criticized the Biden administration for failing to enforce purchase provisions against China that were part of a trade deal Trump signed during his first term.
Afterwards, Young asked Bessent about what his thought process would be for using tariffs on specific sectors or as a negotiating tool rather than applying them universally. Under Trump, tariffs will be equipped to handle unfair trade practices, increase general revenue, and negotiate with international partners on issues like fentanyl.
Senator Maggie Hassan (D., NH) proposed a hypothetical where Trump proposed a policy that could increase prices. Bessent declined to answer her question because it was a hypothetical and subsequently said that if prices go up under Trump there could be a variety of different causes. Bessent also asserted to Hassan that Trump’s policies would allow for inflation to get closer to the federal reserve’s 2 percent target and increase real wages simultaneously.
Bessent is expected to get confirmed with support from the entire GOP-controlled Senate shortly after Trump takes office next week. Trump has already floated the possibility of 25 percent tariffs on imports from Canada and Mexico in addition to 10 percent tariffs on Chinese goods.
Earlier this month, Trump denied a Washington Post story that said his team was looking into methods for scaling back Trump’s tariff plan to only focus on strategically vital sectors.
Bessent on Thursday also called for extending the 2017 Tax Cuts and Jobs Act, reducing the deficit, securing American supply chains, and deploying sanctions to combat geopolitical competitors.
“I believe that President Trump has a generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans. My life’s work in the private sector has given me a deep understanding of the economy and markets,” Bessent said in his opening statement.
“As President Trump has said, we will unleash the American economy by implementing pro-growth regulatory policies, reducing taxes and unleashing American energy production.”
Senator Mike Crapo (R., Idaho) noted that failing to extend the Trump tax cuts will add to the tax burden for all Americans, including those making less than $400,000 annually and pass-through entities.
“This is the single most important economic issue of the day. This is pass-fail,” Bessent responded. “If we do not renew and extend, then we will be facing an economic calamity and, as always with financial instability, that falls on the middle and working class people.”
Facing questions from Senator Raphael Warnock (D., Ga.), Bessent clarified that people from all income levels should receive the gains that come from extending the Trump tax cuts.