On April 2nd, President Trump of the United States announced the implementation of reciprocal tariffs, with a core of a 10% universal tariff policy. This policy aims to reshape the US trade system and industrial structure by imposing higher tariffs on countries like China with significant trade deficits. However, this major policy has triggered strong market reactions, leading to a significant drop in the stock market and sparking concerns about inflation and potential economic recession.
Facing external scrutiny, members of the Trump administration have recently conducted numerous media interviews to clarify the essence and goals of the tariff policy. In an interview program aired on April 4th, Treasury Secretary Scott Bessent described the new tariff policy as a historic economic restructuring experiment. He emphasized that this policy is not only aimed at revitalizing the US manufacturing industry but also concerns the protection of middle-class interests and ensuring long-term national security stability.
Bessent pointed out that Trump’s tariff strategy is built upon three pillars: promoting reindustrialization to strengthen domestic production capacity; using tariffs as a negotiation leverage to reshape international trade relations; and utilizing tariffs as a new source of revenue to reduce the US’s dependence on deficit spending. Through the synergy of these three aspects, the US is moving towards a more independent, autonomous, and secure economic system.
Bessent believes that the core goal of Trump’s tariffs is to stimulate companies to bring manufacturing back to the US by raising the cost of imported goods, thus achieving economic reindustrialization. He noted that the excessive “financialization” of the US economy has led to the decline of the manufacturing industry, especially in defense-related manufacturing, posing threats to national security and lowering the quality of life for workers and the middle class in the Midwest.
Drawing lessons from the COVID-19 pandemic, Bessent emphasized the vulnerability of global supply chains, exposing strategic security risks. He stated, “We no longer produce our own drugs, semiconductors, or even ships.” He believes that tariffs will force companies to restructure their supply chains, prioritizing the US or friendly countries, thereby enhancing economic security. He particularly mentioned that economic security is national security, which is a core principle of the Trump administration.
Bessent referenced a study on the 2004 “China Shock,” emphasizing that globalization has concentrated US economic benefits on coastal elites, while life expectancy and prospects in the Midwest have dwindled. He also described the current state of the US workforce: 10% of wealthy Americans own 88% of the stock market, the next 40% hold the remaining 12%, and the bottom 50% are heavily indebted. By the summer of 2024, the number of Americans using food banks had reached historically high levels. Bessent stated, “For many years, American workers and the middle class have been suffering, facing tremendous pressure. Now, we are finally seeing some research results, and President Trump realized this 40 years ago.”
To reverse this trend, the Trump administration’s tariff policy aims to create a competitive advantage for the US manufacturing industry and alleviate burdens on American workers. Bessent further explained that the reshoring of manufacturing is not only about the economy but also about social equity. By rebuilding manufacturing, the tariff policy will bring employment opportunities to the “rust belt” in the Midwest, reshaping the industrial foundation of the US economy. He emphasized that the goal of tariffs is to bring real wage growth to American workers and improve their lives.
Bessent sees tariffs as a powerful negotiation tool aimed at pressuring trading partners to adjust their policies and achieve fair trade. He stated in the interview, “Some of our trading partners, including some allies, have not been cooperating fairly with us. If tariffs are so bad, why are they also implementing them? If American consumers bear all tariff costs, why do they care so much about tariffs?” Bessent believes that many trading partners restrict American goods from entering their markets through high tariffs and non-tariff barriers, while the US’s long-standing openness has led to trade imbalances. Trump’s “general tariffs” policy breaks this asymmetrical pattern by setting uniform standards and adjusting tax rates based on factors such as trade deficits.
Bessent specifically mentioned China, pointing out that its economic model relies on low-cost production, subsidies, and export orientation, making tariffs a direct challenge to this model. He envisions the most ideal scenario as a rebalancing of the US-China economy: the US reduces consumption and increases manufacturing, while China does the opposite. He said, “China’s economic model is the most unbalanced in modern world history – with excessively high exports as a percentage of GDP and severe domestic consumption insufficiency.” Tariffs will compel China to reconsider its strategy, and as the largest market, the US has negotiation leverage.
Bessent also mentioned the flexibility of tariffs, making them a dynamic tool. He pointed out that President Trump’s ultimate goal is to “bring factories back to the US,” and companies that establish factories in the US can circumvent tariff barriers. With the reshoring of manufacturing, the trade deficit will shrink, shifting the US economic structure from import dependence to internal growth.
In Bessent’s view, tariffs are not only a protective tool but also an important source of revenue, providing financial support for the restructuring of the economic structure. He estimated in the interview that the new tariffs could generate annual revenue of $300 billion to $600 billion, enough to cover Trump’s series of promises, including exempting tips, overtime pay, and social security taxes, as well as providing tax deductions for auto loans made in the US. He said, “These policies provide a ‘affordability’ solution for the 50% of laborers ranked low in US income, as they will benefit the most from it.”
To support the economic restructuring, Bessent revealed that the Treasury Department is pushing for tax reforms, allowing companies to fully depreciate assets in the first year and collaborating with the Department of Energy to ensure energy security. He also mentioned that TSMC plans to build a factory in the US, and the Environmental Protection Agency is expediting approvals to avoid lengthy regulations. These policy measures aim to create a favorable environment for the reshoring of manufacturing.
In the face of the significant market volatility following the announcement of tariffs, Bessent remains optimistic. He quoted Warren Buffett’s saying, “In the short term, the market is a voting machine, but in the long term, it is a weighing machine.” He believes that the recent drop is more due to the adjustment of technology stocks (MAG 7) impacted by Chinese AI technology rather than the tariffs themselves. He pointed out that the S&P 500 and other weighted indexes have only dropped 4% this year, which is negligible in the long-term trend.
Bessent views the current market turbulence as a “necessary pain in a benign transformation.” He reiterated that as long as the economic fundamentals are solid, especially with reasonable taxation, sufficient and inexpensive energy, and proper regulation, along with fair treatment of labor, the market will recover prosperity. Bessent likened the current fluctuations to the challenging beginnings of the Reagan era, noting that Reagan’s overwhelming re-election victory in 1984 proved that short-term pains do not overshadow long-term achievements.
When asked about concerns that the new tariffs might trigger an economic recession, Bessent candidly admitted that he cannot guarantee a recession will not occur in the future but emphasized that there are currently no clear signs indicating the US economy is heading towards a recession. He pointed out that the most important thing now is not to predict the future but to take preventive measures against possible risks to avoid repeating past mistakes.
Bessent likened the current economic reform to “strengthening the cockpit door before a financial crisis arrives,” emphasizing the need to prepare for potential systemic risks in advance. He stated that if an economic system is no longer functioning properly, it must be courageously changed. He criticized the over-reliance of previous economic models on debt, consumption, and government spending, metaphorically comparing it to a “steroid-enhanced bodybuilder” – appearing strong on the surface but internally pathologically weak.
Reflecting on history, Bessent pointed out that every major financial crisis – whether the dot-com bubble in the early 2000s, the financial crisis in 2008, or scandals involving companies like WorldCom and Enron – seemed prosperous on the surface before erupting, with governments and regulatory agencies usually only taking remedial action afterwards. He believes that the Trump administration has chosen to take proactive measures by adjusting trade structures, reshaping manufacturing and financial mechanisms, preemptively eliminating systemic vulnerabilities.
Bessent connected the current policy to the metaphor of “strengthening the cockpit door,” mentioning that after 9/11, all airplanes were retrofitted with reinforced doors, but the Trump administration is proactively installing “institutional protective mechanisms” while the economy is still healthy. He noted that while we may not receive accolades for preventing a crisis, the fact is that this administration is working to avert a financial catastrophe.
As of April 6th, with only a few days since the implementation of the tariff policy, its initial effects are starting to show. In Bessent’s view, Trump’s tariffs are a transformative policy, reshaping the US economic structure through the three pillars of reindustrialization, negotiation leverage, and a revenue source. It aims not only to restore the past glory of manufacturing but also to achieve fair trade through negotiations and to relieve the middle class with tariff revenue. Despite facing questions about inflation, retaliatory tariffs, and market fluctuations, Bessent firmly believes that short-term pain is a necessary price for long-term prosperity. He compared the current policy to the challenging beginning of the Reagan era and emphasized that with solid economic fundamentals, the US will experience a revival.