


Treasury Secretary Scott Bessent has been tasked with driving Trump’s sweeping tariff agenda while calming markets, a role made even more difficult by a weakening dollar and lingering inflation concerns.
Bessent, a well-known hedge fund manager before joining the Trump administration, faces a task that some economists argue is contradictory. President Donald Trump has embarked on the most aggressive tariff rollout in decades. Bessent is one of the key people carrying out that agenda, but he is also working simultaneously to limit any fallout for Wall Street and the broader economy.
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That puts him in a bind because investors generally fear tariffs. This negative sentiment has led to a steady decline in the dollar, which Bessent is tasked with defending as treasury secretary.
Steve Kamin, a senior fellow at the American Enterprise Institute and former Federal Reserve official, told the Washington Examiner that Bessent has a tough job, given the “Liberation Day” tariffs that Trump announced earlier this year. Markets reacted poorly to Liberation Day, although they have since bounced back.
“The treasury secretary’s job is to, among other things, is to basically keep financial markets stable and confident, and obviously that was tremendously difficult for Bessent right after Liberation Day,” he said.
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In recent weeks, markets have shown fewer signs of worry about tariffs. Stock values have hit new highs, in part reflecting optimism about artificial intelligence companies and the prospects of monetary easing by the Federal Reserve. But the dollar, in particular, has not recovered.
The value of the dollar has dropped over 10% since the beginning of 2025, according to the Bloomberg Dollar Spot Index.
All else equal, economists would have typically expected the dollar to strengthen in light of the largest tariff hike in decades, as fewer dollars would be traded for foreign goods.
However, other factors have outweighed any boost to the dollar from tariffs, including fears that the tariffs could push the economy into recession.
That dynamic has put Bessent in a difficult position. Some analysts say that Bessent, with his long experience in currency markets, was likely unprepared for the extent of Trump’s tariffs blitz and is likely to be a figure within the administration counseling restraint.
“My sense is that somebody of his stature and experience and track record, my hope would be, that he has been trying to hold President Trump back from his worst instincts, the instincts that have been on display for 40 years in his call for basically a long-lasting trade war,” said Joel Griffith, a senior fellow at Advancing American Freedom, a group founded by former Vice President Mike Pence.
Notably, Bessent has tried at times to calm markets jittery about tariffs. When the “Liberation Day” tariffs caused stocks to dive, for example, Bessent reassured investors that the rates represented a “ceiling” on tariffs and would be lowered if trading partners did not retaliate.
On the other hand, defenders of the Trump tariffs argue that they are necessary to even out an international trade landscape that has been unfair to U.S. interests and is harmful to domestic manufacturing and industry.
“The Trump administration strategy, even from the campaign trail to now, has been pretty clear — they want to rebalance the global trading environment, and they want to use tariffs as a means to raise revenue and to reshore industry,” Nick Iacovella, executive vice president at the pro-tariff Coalition for a Prosperous America, told the Washington Examiner.
Iacovella said Bessent has been “a force” in the administration because of his deep knowledge of macroeconomics and “understands the global economy through a macro lens.” Iacovella said that traditionally, Treasury secretaries have been pro-Wall Street, which doesn’t like tariffs, while Bessent has helped lead Trump’s anti-Wall Street, pro-Main Street agenda.
He said that after Trump was elected, there were expectations that he would pick a pro-tariff or pro-Wall Street secretary, which markets would respond positively to.
“It was kind of an either-or choice, and in typical fashion for the President, I think we can look back and say that with choosing Bessent, he chose a Treasury Secretary that fit both of those,” Iacovella said. “The markets respect him; Wall Street respects him. He’s also unapologetically pro-the President’s agenda.”
The Trump tariff agenda hit a pretty major speedbump on Friday when a federal appeals court ruled 7-4 that tariffs imposed using the International Emergency Economic Powers Act are unlawful. Those include the “Liberation Day” tariffs.
Following Friday’s ruling, Bessent predicted that the Supreme Court would rule in favor of the administration and told Semafor that he intends to write a brief defending the use of tariffs under IEEPA.
“Everyone says, ‘Well, we’ve had these trade deficits a long time. How is it an emergency?’” Bessent said. “There’s this idea of a tipping point. … Are we approaching — and I believe we are — an unsustainable equilibrium that would have caused financial instability? Is the president using his emergency powers to truncate a financial crisis? What if someone had done that for housing in ’05 or ’06?”
Kamin has recently been looking into how the value of the dollar reacts to financial market volatility. Traditionally, when volatility — measured by the Chicago Board Options Exchange Volatility Index and better known as VIX — goes up, so does the dollar, because it is seen as a safe haven or flight-to-safety currency.
When Trump announced the “Liberation Day” tariffs, though, the opposite occurred. The dollar sank instead of rising amid the market turmoil of earlier this year. The pattern, though, has since reversed.
In the U.S., exporters are the big winners from a decline in the dollar. The lower dollar means they can sell their products abroad more easily. U.S. technology companies like Apple, which sell a significant share of their products abroad, benefit from the lower dollar, at least theoretically, as their goods become cheaper than foreign alternatives.
Iacovella said that two of Trump’s goals are to raise revenue and reshore the U.S. industry. He argued that the dollar has actually been overvalued for a long time.
“An overvalued dollar is actually harming the ability to reshore industry, so there’s these two things fighting against each other,” he said. “The overvalued dollar is also contributing to some of our trade imbalances.”
Still, some investors have raised fears about the dollar.
Ray Dalio, the billionaire founder of hedge fund Bridgewater Associates, said in an interview published Tuesday that investors have been shifting into gold and away from Treasuries and that if the Federal Reserve is under pressure to keep rates low, it could make “holding dollar-denominated debt assets less attractive, which would weaken the monetary order as we know it.”
Bessent has brushed off worries about the dollar. “The price of the dollar has nothing to do with a strong dollar policy,” Bessent said in an interview with Bloomberg Television on Thursday. “The strong dollar policy is, are we doing the things over the long term to ensure that the U.S. dollar remains the reserve currency of the world?” he said, arguing that the Trump administration was indeed taking such steps.
A critical feature of the macroeconomic situation is that inflation remains stubbornly high. Inflation in the consumer price index was running at 2.7% in July, above the 2% level the central bank considers to be healthy.
Some economists think the tariffs will make the Fed’s ability to fight inflation more challenging, although views are mixed on whether the levies represent a one-time price adjustment or something even more serious.
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Norbert Michel, vice president and director of the libertarian Cato Institute’s Center for Monetary and Financial Alternatives, said that concern about the tariffs represents more than their impact on inflation.
“Whether tariffs lead to inflation for a long period, a short period, or a one-time price level increase is pretty much irrelevant, right? The whole thing is designed to shrink overall economic output, and that’s what it’s going to do, and nobody is going to win,” Michel told the Washington Examiner.