US Treasury Secretary Bessent addressed various economic concerns, stating that the Trump administration prioritises the real economy over short-term volatility. He noted that a government shutdown would have disruptive effects and would be owned by the Democrats.
Regarding tariffs, Bessent mentioned that aside from certain metals, most goods are subject to tariffs. He indicated that surplus countries would face the largest impact if trading partners escalate issues. CEOs reportedly support a transitional approach to the current economic situation.
Fiscal Control And Growth Outlook
Bessent remarked that the US faces a spending issue rather than a revenue problem, stressing the need for fiscal control. He expressed optimism about potential positive growth in Europe and the stabilisation of China. Additionally, he mentioned that the Atlanta Fed GDP tracker may be revised higher due to adjustments in gold import calculations.
Bessent’s remarks shed light on the administration’s stance towards broader economic conditions, particularly in how policy decisions shape both immediate and longer-term expectations. The emphasis on the real economy over short-term market fluctuations suggests that officials are willing to tolerate swings in financial markets if they believe structural priorities remain intact. That should not be taken as indifference to volatility, but rather an indication that short-term disruptions will not dictate broader shifts in fiscal or trade policy.
His comments on a potential government shutdown highlight a political calculus alongside the economic consequences. If such an event materialises, the rhetoric suggests federal officials will frame it as the responsibility of the opposing party. Markets, in turn, would likely react not just to the direct economic disruptions, but also to the political ramifications that follow. The response of businesses, particularly in sectors reliant on government contracts, would be essential to monitor in that case.
On tariffs, Bessent’s observations suggest that while selected exemptions remain, most goods continue to face restrictions in some form. His view that surplus economies stand to lose the most if tensions rise further was particularly pointed. If trading partners respond with countermeasures, the scale of economic disruptions could be uneven across industries, with sectors deeply tied to international supply chains likely to feel the effects first. That aligns with reports of executives preferring a phased approach, hinting that major firms are adjusting expectations rather than assuming immediate reversals.
Potential Revisions In Growth Estimates
The distinction made between a spending issue and a revenue problem underscores an administration position favouring tighter fiscal management rather than new taxation measures. If that view informs policy discussions in the coming weeks, focus will likely remain on expenditure adjustments rather than revenue-raising initiatives. That also places attention on upcoming budget negotiations, where strategies to control spending could emerge as key discussion points.
Bessent’s optimism about European growth and China’s stabilisation suggests a broader confidence in the external environment. A stronger European outlook, if realised, could influence trade dynamics and corporate earnings forecasts, particularly for firms with international exposure. Stabilisation in China, meanwhile, might reduce broader concerns about weaker global demand. However, whether this optimism aligns with incoming data remains to be seen.
He also pointed to a potential revision in the Atlanta Fed’s GDP tracker due to adjustments in gold import data. While revisions are routine, an upward adjustment would reinforce the view that underlying economic activity remains robust. That could, in turn, affect rate expectations, particularly if stronger growth arguments gain momentum. The timing of when any revisions are formally recognised would matter, as shifts in tracked GDP figures often influence sentiment around central bank policy adjustments.
