Traditional gatherings of former Finance Secretarys are often a relaxing and enjoyable thing. But the tone was very serious when the group was called this month on President Trump’s “Liberation Day.”
Treasury Secretary Steven T. Mnuchin, who overturned global trade with penalties to allies and opponents, Treasury Secretary Scott Bessent is at the center, defending the policy that many in the room see as economic misconduct.
“The mood is dull,” said W. Michael Blumenthal, 99.
According to Mr Blumenthal and others familiar with the dinner, Mr Bessent put pressure on the strategies behind the tariffs and their impact on the economy. Sometimes, Mr. Bessent raised his voice when his ex face-to-face with Mr. Trump's attitude.
“He didn’t just smile,” Mr. Blumenthal recalled. “He's there-he has to defend it.”
The guest list includes Robert E. Rubin, Henry Paulson, Lawrence H. Summers, Timothy Geithner and Jack Liu. A spokesman said former Finance Minister Janet L. Yellen was traveling in Australia and did not attend.
The Ministry of Finance declined to comment on dinner, while Mr. Bessent declined to comment on this article.
The bumpy welcome reflects Mr. Becent's first few months of his toughest job in Washington. Wall Street praised his nomination, hoping that he could be a voice of moderation and he could ease Mr. Trump's instinct to spread tariffs around the world.
Now, Mr. Bessent, 62, is at the center of an ugly trade war with China, with economists fearing a restart of inflation and causing a global recession. According to most metrics, when Mr. Trump took office in January, the U.S. economy was the most powerful in the world, leading some analysts to describe the president's actions as a historic self-harm similar to football players' goals against their teams.
“This is one of the biggest goals in diplomacy, economy and trade that I think we've done,” said David Autor, an economist at MIT.
Mr. Bessent expressed doubts about the tariffs before joining the government. But Mr. Trump’s trade protectionist trade instinct is well known.
As a former hedge fund manager who established the Key Square Group, Mr. Bessent wrote in a letter to investors last year that he was skeptical of the tariffs: “Tariffs are inflationary and will strengthen the dollar – hardly a good starting point for the U.S. industrial Renaissance.”
However, as Finance Minister, Mr. Becente had to publicly adhere to the government's pro-school stance. He now believes that tariffs will not be inflation, but a “price adjustment” to the economy.
Some of his comments have attracted attention. After China responded by imposing higher taxes on U.S. products, Mr. Bessent downplayed the potential impact on the U.S. economy and said, “So what?” He believes that the U.S. has the upper hand because China relies on exports to the U.S.
Two days later, Beijing retaliated against even tougher taxes, escalating the economic struggle between the world's largest economies and sending jitters through financial markets.
As the market has suffered its worst rout over the years, Mr. Bessent advises those close to retirement may not pay much attention to the decline in the value of their nest eggs.
“Americans who want to retire, Americans who have been investing in savings accounts for years, I don't think they think they are thinking about the daily fluctuations of what is happening,” he said in NBC's “Meeting Media” last Sunday.
The Democratic National Committee seized on Mr. Becente's comment that the economy was in good shape and pointed out that the stock market had been saving.
Given that the government's trade agenda is more aggressive than most experts expected, Mr. Bessent fell into a uncomfortable position to some extent.
Mr. Trump imposes tariffs on almost every country, including at least 145% of Chinese imports. These moves caused stocks to plummet, tensioning the bond market, and causing economists to increase the odds of recession.
Some of the top Republican lawmakers, including Texas Senator Ted Cruz, also violated the tariffs. Mr. Cruz warned in his latest podcast that tariffs are taxes on consumers.
“It’s terrible for the U.S.,” he said. “If we have taxes everywhere, it will destroy work from home and cause real damage to the U.S. economy.”
Mr. Bessent managed to adjust Mr. Trump's attitude to some extent. On a trip to Mar-a-Lago last Sunday, Mr. Best convinced him to suspend so-called mutual tariffs in dozens of countries and began trade talks with them. After returning, Mr Best insisted that he was primarily focused on tax policies, saying he played a leading role in trade negotiations.
But the deepening confrontation with China shows that as Mr. Bessent debated with Mr. Trump’s trade adviser Peter Navarro and Commerce Secretary Howard Lutnick, they consulted a more hawkish approach.
“The best part is that he can be a consultant there,” said Marlene Jupiter, who has worked with Mr. Bessent for five years. Her deep understanding of the market should help calm investors feel nervous about trade uncertainty, but “I don’t know how much Trump listens or doesn’t listen.”
The Treasury Secretary was unable to limit Mr. Trump more effectively, which frustrated some investors.
“In a sense, I’m disappointed with Bessent, which Mnuchin and Cohn have never let it go too far,” said Spencer T. Hakimian, founder of Tolou Capital Management, a New York hedge fund. Mr. Mnuchin is Treasury Secretary and Gary Cohn serves as director of the National Economic Commission and is two economic advisers for Mr. Trump’s first term, who warned him not to overuse tariffs.
Mr Hakimian added: “The whole reason the market is interested in Bessent is because they see him as Mnuchin 2.0, a traditional Wall Street guy who doesn't want to let it do that.”
Mark Sobel, who has worked with the Treasury for nearly 40 years, noted that Mr. Bessent was judged as how he publicly justified it for his reduction in the countdown tariffs.
“It's hard for Americans to see him as a credible and serious economic spokesperson, for example, when tariff fluctuations are a strategy, otherwise citizens shouldn't be bothered by the fluctuations in the day-to-day stock market when their 401(k) is a tank,” Mr. Sobel said.
Ultimately, however, the final decision on the tariff will depend on Mr. Trump.
“While the Treasury Secretary is a Senior most economic official in the executive branch, the president is the captain of any team,” said R. Glenn Hubbard, deputy deputy secretary of the Treasury. “Whatever the Finance Minister says must be on the same page as the President.”
People familiar with the matter said that during dinner with Mr. Bessent, the former secretary expressed encouragement in concerns about Mr. Trump's policies, lawyers and historical views.
In an exchange, Mr. Summers, who served in the Clinton administration, told a sharp story about George Shultz, who was nominated as Secretary of Treasury by President Richard M. Nixon in 1972 and was in support of audit political enemies in bosses who paid their bosses to the university and used internal tax services.
Mr. Summers said in a recent social media post that he would resign if he was still in the administration because of the Trump administration’s analysis to support its tariff plan.
Mr Blumenthal said he hopes Mr Bessent's luck in the work is more complicated and “best suits the country and the president want to be different”.
He added that traditionally, enthusiastic meals were about policy discussions or advice from financial veterans.
“This is a very special moment,” Mr. Blumenthal said.
Anna Swanson Contribution report.
