About 10 days ago, an increasingly confident Scott Bessent began telling Wall Street executives that he was on the verge of removing the big dark cloud hovering over the US markets and economy: The Treasury Secretary said he was making significant progress in cutting trade deals with India, Japan, South Korea, and Australia, some of our biggest trade partners.
The markets would love the move; President Trump could move forward with his broader plans of isolating the rogue of the global trade, China, with its high tariffs and frequent theft of US intellectual property.
He would avoid an existential threat to his young presidency in a tariff-induce economic meltdown that could lead to rampant inflation and a recession.
But that was last week, and there are still no deals — at least none that look imminent by press time Monday — which is why the markets resumed trading after the weekend in free fall. It didn’t help that Trump added to the uncertainty, when he called Fed Chair Jerome Powell a “major loser,” more than hinting that he will try and remove him over his reluctance to cut interest rates because tariffs might stoke inflation.
Stocks fell more than 2%, depending on the index. The Dow crashed 1,200 points at one point, bond yields spiked, and other more ominous signs: A flight not to US treasuries or the dollar but gold and Bitcoin, the world’s largest crypto currency that has no inherent value other than what some bro in his basement thinks it’s worth.
The trade war wasn’t supposed to go down this way.
Dan Ives, the veteran tech analyst for Wedbush, put it this way: “The White House needs trade deals done quick with a negotiation path established with China otherwise the markets, 10-year yield, USD, Gold, and the economy will head down their own divergent paths over the coming weeks and months ahead.”
So far, businesses have held back from announcing layoffs amid the uncertainty because, as one institutional investor put it, “Trump might be able to pull this off,” and cut favorable trade deals.
But what if he doesn’t?
That’s the increasingly key concern for big investors and corporate CEOs as they see their costs rise because of tariffs and a possible economic slowdown.
Consider: Japan was thought to be close to getting a deal, but then nothing happened. One top investor said he was told by a Japanese trade official that the White House keeps fiddling with the exact terms. The White House believes that Japan along with the other nation’s on Bessent’s list have been slow to remove protectionist trade barriers for US goods.
Wall Street believes messaging is still a problem. The more trade centrist Bessent appears to be spearheading the efforts, but Trump’s voluble and hawkish Commerce Secretary Howard Lutnick remains in the trade meetings along Jamieson Greer, the US trade. ambassador. All three were in last week’s White House confab with the Japanese trade minister Ryosei Akazawa.
Peter Navarro, the uber hawkish Trump trade guru is always in the mix.
Most worrisome is that markets, and businesses in general, love certainty and Trump is anything but a straight arrow when it comes to negotiations; his skill is to keep the other side off balance as he did successfully with banks during his long career in real estate and business.
It worked then. The question is will it work now as he negotiates with countries instead of creditors.
“In the end, it doesn’t matter what Bessent thinks or does because he works for Trump,” one banker who deals with the White House told me.
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