Treasury Secretary Scott Bessent tried to reassure investors at the Milken Institute’s annual conference on May 5 by explaining that President Trump’s damaging tariffs are just one prong of a three-part plan to make the US economy more productive. Tax cuts and deregulation are coming next, he said.
“The Trump economic agenda is more than the sum of its parts,” Bessent told a ballroom packed with investors and business leaders in Beverly Hills, Calif. “Each policy is mutually reinforcing, and they push toward the same goal, which is to solidify our position as the home of global capital.”
Attendees were happy to hear it. But they had their own message for Bessent: Speed Trump’s trade war along so we can figure out what the end-state looks like.
After Bessent spoke, Citigroup CEO Jane Fraser said she foresees three phases of the Trump tariffs, which so far have raised the average tax on imports from 2.5% to about 25%. In the current phase, businesses and consumers have sped up purchases to beat the higher cost of tariffs, which looks like a boost to consumption now. But the second phase will involve a pullback on spending, hiring, and investing as everybody waits to see where the Trump trade war is heading. The third phase will be a kind of end-state in which it becomes clearer what the final tariffs will be as spenders adjust.
“One of the big questions is what is the magnitude of the tariffs,” Fraser said. “If it’s 10%, most companies say we can absorb that. If it’s 25%, not so much.”
Trump has imposed tariffs on many countries, but the main target, by far, is China, which Bessent described as “the biggest piece [in] the trade puzzle.” Tariffs on Chinese imports are now as high as 145%, while most of Trump’s other tariffs top out at 25%.
Read more: What Trump’s tariffs mean for the economy and your wallet
Trump has promised a slew of trade deals as his administration negotiates with various countries one by one. Progress can’t come quickly enough for markets. “All of it depends on how quickly the administration can walk through these negotiations,” Harvey Schwartz, CEO of private-equity firm Carlyle Group, said at the conference. “We feel confident we’ll come to a point of equilibrium, but the big question is what happens to China. It’s not a good thing for anybody for the two largest economies in the world to be in a trade war.”
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In response to the Trump tariffs, China has slapped tariffs on some US products that go as high as 125%. In some cases, the tariffs in each direction are so high that product shipments have stopped. If the tariffs stay in place, the inevitable outcomes will be a depressed manufacturing sector in China and soaring prices combined with product shortages in the United States.
Trump has hinted that he’s ready to deal with China, but China says no talks are underway. Rumors about possible talks have been goosing the stock market, while denials by Trump or signs of a growing impasse send stocks down.
Trump has a self-imposed deadline of early July to ink some trade deals. That’s when Trump’s “reciprocal” tariffs on imports from many countries, which he suspended on April 9, are supposed to go back into effect. Trump could extend the delay again, but that would disappoint many investors who expect the deadline to help force some deals onto the table in coming weeks. “Markets would like to see a couple of deals to know the US intends to play ball,” Jenny Johnson, CEO of investing firm Franklin Templeton, said at the Milken Conference.
While Trump is trying to negotiate trade deals, Congress will be working on a big tax cut bill and Trump administration regulators will be trying to cut red tape to make it easier to build energy infrastructure, factories, and housing. “The Trump economic agenda is more than the sum of its parts,” Bessent said in Beverly Hills. “It will empower business leaders like you to put your capital to work as quickly and efficiently as possible.”
Investors might believe it someday. “The administration is doing a better job articulating what the plan is,” Johnson said after Bessent spoke. But a clearer plan isn’t the same as convincing results, and Trump’s tariffs seem likely to keep the outlook cloudy for weeks or months to come.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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