On Thursday, March 6, US Treasury Secretary Scott Bessent defended President Trump’s trade policy in a speech to a group of top economists, stating that tariffs would not lead to inflation.
During his speech at the Economic Club of New York, Bessent emphasized that “obtaining cheap goods is not the essence of the American dream.” He pointed out that the essence of the American dream is “that any citizen can achieve prosperity, upward mobility, and economic security.”
Bessent reiterated Trump’s “America First” trade policy, highlighting that the designers of multilateral trade agreements have long overlooked the need to re-examine international economic relationships that do not serve the interests of the American people.
Earlier this week, Trump imposed a 25% tariff on Canada and Mexico, but after negotiations with these countries, he added a series of exemptions and delayed implementation measures. Additionally, the global “reciprocal tariffs” are still set to be implemented from April 2.
With the possibility of new tariffs being imposed on a large number of foreign goods soon, many companies have increased imports before the new tariffs take effect. This has led to a surge in trade deficits to new records, posing threats to future investments and employment.
Earlier that day, data released by the US Department of Commerce revealed that the trade deficit in January skyrocketed to a record $131.4 billion, a 34% increase from the previous month, nearly double compared to the same period last year.
The talk at the Economic Club of New York on Thursday was hosted by Larry Kudlow, who served as Chairman of the National Economic Council during Trump’s first term.
Economists and market participants are concerned that Trump’s tariff policy will raise prices and slow economic growth. However, White House officials point out that during Trump’s first term, tariffs had minimal impact on inflation. Furthermore, businesses repatriating to the US to avoid tariff payments bring growth potential.
When asked by Kudlow, Bessent stated that in the long run, the new tariffs will not cause inflation, and the one-time impact is likely to be temporary.
He added that President Trump sees three major benefits of tariffs: first, as a source of revenue for the massive US fiscal deficit; second, to protect American industries and workers from global unfair practices; and third, as the “third leg for negotiation” utilized by Trump.