Bessent Tries to Cool Tariff Jitters, But Markets Remain Skeptical

U.S. Treasury Secretary Scott Bessent delivered a wide-ranging interview Friday on Bloomberg TV that aimed to reassure markets following President Trump’s escalation of tariff rhetoric against the European Union. Known for playing the “good cop” in Washington’s trade posturing, Bessent attempted to ease investor concerns with tempered remarks on trade, deregulation, and Treasury market dynamics. However, the response from equities was muted, suggesting his tone may have lacked the punch needed to overcome technical weakness and pre-holiday caution.

Muted Market Response

Equity markets showed little sign of recovery following Bessent’s remarks, with the S&P 500 still trading below its 200-day moving average—often a key sentiment level for institutional traders. The lack of a bounce could reflect skepticism about the administration’s policy coherence or simply technical exhaustion after a week of volatility. It’s also possible investors are reluctant to add risk heading into a long weekend, especially as participation thins with traders heading for the Hamptons and tariff uncertainty lingering.

Tariff Rhetoric vs. Trade Diplomacy

Bessent acknowledged the tensions with the EU, noting that “Trump move[s] in response to the EU’s pace on tariffs” and that the bloc faces a “collective action problem.” While reaffirming the administration’s dissatisfaction with Brussels, he struck a more optimistic tone regarding progress with India and other Asian economies, stating that trade talks there were “far along.” His comment that the U.S. expects to resume in-person negotiations with China also helped hint at potential de-escalation, though markets seemed unmoved.

Fiscal Tone and Structural Reforms

On the fiscal front, Bessent provided little to jolt investors into optimism. He acknowledged “resistance to government spending cuts” and deferred questions about the growing deficit by saying, “let’s wait and see the Trump plan play out.” He attempted to counter deficit concerns by citing “above-target tax collections this filing season,” but the market appears unconvinced that these one-off factors offset the long-term fiscal drag from Trump’s proposed tax extensions and tariffs.

He did, however, hint at policy actions that could move the needle in fixed income: a summer shift in the supplementary leverage ratio (SLR) regime. “An SLR shift could bring down yields by tens of basis points,” he noted—an acknowledgment that regulatory tweaks could potentially increase bank demand for Treasuries and provide relief to strained bond markets.

Dollar, Debt, and Fannie-Freddie

Bessent pushed back on fears of dollar weakness, stating, “I wouldn't necessarily categorize this as a weak dollar, other countries’ currencies [are] rising.” On U.S. debt dynamics, he said bluntly, “I’m not worried,” a stance likely to raise eyebrows among investors still digesting the implications of higher-for-longer yields and Moody’s downgrade of U.S. credit.

Interestingly, he also floated the idea of pivoting to “the privatization of Fannie Mae and Freddie Mac” once trade deals are resolved, resurrecting a long-dormant GOP agenda item that could re-enter the market narrative later this year.

Deals and Deregulation

Bessent hinted at bullish structural themes, predicting “several large deals announced” in the next few weeks and saying deregulation would “kick in for growth in Q3-Q4 2026.” He also emphasized the administration’s goal of making the U.S. “the most attractive for capital,” adding that the IRS modernization could be completed by the end of Trump’s term—a nod to investor confidence in bureaucratic stability.

Perhaps most consequential for tech investors, Bessent spoke to semiconductor reshoring and Apple’s potential role in revitalizing U.S. manufacturing. “We’d like to have Apple help us make the semiconductor supply chain better,” he said, reinforcing industrial policy as a key White House priority.

Conclusion: Reassurance Without Rally

Despite Bessent’s trademark calm and policy hints intended to cool nerves, the market's chilly response reflects a dynamic where words no longer suffice. Whether due to technical breakdowns, fatigue over mixed messaging, or pre-holiday de-risking, Bessent’s comments didn’t reverse sentiment. Instead, they served more as a placeholder, with traders now awaiting further clarity—especially on the tariffs front—before re-engaging risk. The Treasury Secretary may still be the “good cop,” but even the good cop needs better timing or stronger policy ammo to break through the current macro haze.