On April 6, the Sunday after Donald Trump announced the "Liberation Day" tariffs, Treasury Secretary Scott Bessent joined the president on his flight back to Washington from Mar-a-Lago. Bessent wanted to discuss damage control.

At the time, photos of Trump in the Rose Garden waving a placard proclaiming tariffs as high as 49% had spooked investors worldwide, triggering the biggest two-day stock selloff since the pandemic. "We are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market for capital investment," billionaire investor Bill Ackman wrote in a post on X, warning of an impending "economic nuclear winter." JPMorgan Chase & Co. CEO Jamie Dimon chimed in, saying the tariffs would likely reignite inflation and potentially lead to a recession. Larry Summers, the former Treasury Secretary, predicted the U.S. would lose millions of jobs. Bessent, a former hedge fund manager, had told his clients months earlier that under Trump, "the tariff gun will always be ready, but rarely unleashed." In Wall Street's eyes, he was supposed to be a safety net.

So where was he? After a 40-year career in finance, including work for investment legends like George Soros and Stanley Druckenmiller, Bessent had his own ideas about how to calm panicked traders. "I think I could have made the market go up on Liberation Day," he said in a late July interview in his office at the Treasury Department. "If only we had said, 'Here's the number. This is the maximum tariff level if you don't retaliate, but we're open to negotiations.'"

On Air Force One that Sunday in April, Bessent said he proposed immediately lifting the tariffs to defuse the crisis. But the president was undeterred. He wanted to scare America's trading partners into negotiating. "Just give it a few more days," he told Bessent. "Don't say we're willing to negotiate."

Trump finally relented just hours before the levies were supposed to take effect. On Wednesday, April 9, he announced a 90-day pause on so-called reciprocal tariffs and a temporary 10% tariff on every country except China. Speaking to reporters outside the White House, Bessent praised the president's "great courage" in standing his ground. Stocks surged again.

The story everyone on Wall Street wanted to believe was that Bessent, one of his associates, persuaded a reluctant Trump to give in on the tariffs after friends who had bet billions of dollars called him to complain. That's the thinking behind the now-famous acronym coined by a Financial Times columnist, TACO, for "Trump is always afraid." Bessent insisted that was wrong. "The market didn't force him," he said. "He has a higher risk tolerance than I do." The episode highlighted how decisions were made in Trump's second administration.

Many on Wall Street and elsewhere viewed Bessent as a moderate, someone who could pull Trump back from the brink of ruin, at least on economic issues. However, throughout the lengthy interview, he repeatedly downplayed his role, presenting himself as a humble adviser whose job is to help the president channel his populist impulses into policy and then translate them for the markets. "I do my job, give him options and outcomes, present them, and then manage the narrative from there," he said.

That may sound overly humble for someone as respected as Bessent, but it's a tried-and-true strategy. "Whether you're negotiating at the G-20, negotiating a trade deal, or negotiating with Congress, you better understand that you're speaking on behalf of the president," said Steven Mnuchin, who served as Trump's Treasury Secretary from 2017 to 2021. "If you're not doing what the president wants and not representing him well, the role has no power." (alg)

Source: Bloomberg