Bessent: This was Iran's BIG mistake

[0:00] I caught up with Treasury Secretary Scott Bessent for an exclusive interview at the Reagan National [0:04] Economic Forum in Simi Valley, California, over the weekend, just days after his first meeting [0:09] with newly sworn in Federal Reserve Chairman Kevin Warsh to discuss negotiations with Iran, [0:15] the president's economic agenda, and the resilient economy and markets. [0:22] Let me get your take on what we're discussing in terms of the Iran war. [0:25] How will you ensure that they keep their promises? I mean, after all of the lies and [0:30] and the back and forth with the Iranian leadership, do you have confidence that they're going to keep [0:35] a promise? Well, what I have confidence in is that President Trump's going to hold them to it, [0:41] that with the Iranians, we'll see. Their government, as I've said, we didn't have regime change, [0:49] but we changed the regime. The first layer, it was decapitated, second layer decapitated. [0:56] We're on the third group, so maybe they've seen what happened to the others. [1:01] And they see that what President Trump is willing to do. So if President Trump agrees to this deal, [1:07] I would tell the Iranian leaders right now, he will enforce it, and both military and economically. [1:14] So what are the markers that you're going to use to ensure that they're keeping their promises? [1:20] Again, you know, we'll see that the easiest is freedom of navigation in the Gulf, [1:25] through the Strait of Hormuz, got to go back to the way it was before. The U.S. Navy has been fighting [1:33] pirates since before we were a country, and we're not going to put up with these pirates. So, but this [1:40] is a chance for the Iranian leadership to try to become a normal country. They've been a pariah [1:45] country for 47 years. They're the largest state sponsor of terrorism. And the Iranian people, [1:54] they have a rich history. They're great merchants. They have great culture, music, food. And it is a [2:00] once-in-a-generation chance for the Iranian state, for the Iranian people to come back into the global [2:09] system. [2:09] I know that the president has led this obliteration of Iran in terms of the military, but your programs [2:16] in terms of economic fury, what do you believe was the most significant in terms of sanctions and the [2:21] economic power that you have put against Iran? [2:25] Well, I think there were three parts to it. So, I think going in five and a half, six weeks on the military, [2:31] a lot of turmoil there, a lot of their services, a lot of their factories for missiles, drones taken out of [2:41] commission. Secondly, it was the economic side in terms of what we've done. And a big mistake that [2:50] the Iranians made was attacking their GCC neighbors, their neighbors in the Gulf, because we had many very [2:57] good allies who maybe weren't completely transparent with us on the money, Iranian money that was in [3:04] their banking systems, all of a sudden became very compliant in terms of being willing to turn over [3:10] accounts or help us freeze block accounts. And then the third part was the incredible blockade. [3:16] I really think it's the economic blockade of funds and the physical blockade of the ships not going in [3:26] or out of the Iranian ports. Karga Island is shut down. That's their big oil loading facilities. And [3:34] that means that they're going to have to start taking down the wells soon. [3:37] Now, a lot of people have asked me recently, will President Trump finish the job? [3:40] Well, again, what does finish the job mean? Because if finish the job means making sure that [3:48] Strait of Hormuz is open, that we get the highly enriched uranium, uranium, and that Iran doesn't [3:55] have a nuclear weapon, that is finishing the job. That's finishing the job. And to be clear, [4:03] that by whether it's the military intervention, the blockade or the economic fury, this is the first [4:09] time the Iranians have ever been willing, 47 years, have been willing to discuss not having [4:14] a nuclear weapon. It was, you know, a verboten subject. And now it's on the table for the first [4:20] time, thanks to President Trump. That is such an incredible point. You're right about that. [4:24] Let me get your assessment of the economy today. Are you surprised that the markets have been [4:28] incredibly resilient, that the consumer seems to be still holding up, even though we are seeing a spike [4:33] in inflation? Well, again, it's a very limited spike, I think. If you look, it's energy-driven. [4:41] It's a supply shock. We will get to the other side of this. Markets live in the future. Markets are [4:47] looking through this. And, you know, another way to phrase it, Maria, though, is many people have said [4:52] to me, are you surprised that the market's gone up on bad news? And I said, you know, I don't think the [4:57] news is that bad. I think the news is bad. The quality of the reporting, the anti-Americanism, [5:05] the anti-the, you know, people are so anti-President Trump, anti-this administration that, you know, [5:13] I have perfectly asymmetrical information. And I know we have something, the Iranian Navy, [5:21] their Air Force, the 80, 90 percent of their missile factories they are done in, their launch [5:29] facilities. You know, I know 50 percent of the military is not getting paid. Police aren't [5:35] reporting to the stations. I mean, if you were to look at a lot of these major news outlets, [5:40] and especially the newspapers who now like putting opinion on the front page rather than facts, [5:45] you would think we are losing. This is a wipeout. We wipe them out. So, no, I'm not surprised, [5:52] because, again, the information that I have that, you know, we're looking through this. [5:58] But you've got to communicate that to people before the midterms. I mean, President Trump and [6:02] yourself obviously have been balancing this, you know, getting rid of a potential nuclear terrorist [6:07] with the idea that oil prices and gas prices have to go down before the midterms. [6:11] Well, they will. You know, that oil prices, crude, West Texas is down about 20, 25 percent [6:20] from the closing peak a couple of weeks ago. It's down about 12 percent this month. [6:27] Gasoline prices are down, I think, about 5 percent now. And, you know, they will go back down. [6:32] And, again, that we understand that there is a disturbance here, that it's uncomfortable for [6:43] people. But we're going to get to the other side of that. And I think on the other side, [6:47] the oil market is going to be very well supplied. The UAE has come out of OPEC. I think we maybe got [6:54] some permanent demand destruction out in Asia. So I am very confident that the energy prices are going [7:01] to come down very quickly that we had record tax refunds that they and, you know, I told you [7:09] before, 44 percent of filers, 62 million forms we had filed, they applied for one of the president's [7:17] four signature tax policies. No tax on tips, no tax on overtime. They limited tax on Social Security. [7:23] Eighty-five percent of our seniors didn't pay tax on their Social Security and deductibility of auto [7:28] loans for American-made cars. Well, the deductibility and the expensing options have [7:32] been incredible for businesses. And I do think that was a major tailwind for earnings. [7:38] And we're seeing that factory construction and manufacturing construction, you know, up 17, [7:45] 19 percent. And you know what happens, Maria? Construction jobs of facilities turn into manufacturing [7:51] jobs. We've seen an uptick in manufacturing. Secretary, I was very surprised that the Senate [7:56] left without delivering the reconciliation package for funding of immigration. And I just wondered [8:02] what was behind that. What are your thoughts on that? Is that, was it really the anti-weaponization [8:07] fund? Was it something else? Was it President Trump's support of Ken Paxton? What was it? [8:11] Well, you know, Maria, I was a civilian most of my life. I've only been in D.C. 15 months. So [8:17] I've learned not to try to predict what motivates people up on the Hill. But what I do know, [8:25] what motivates the Republican Senate, the Republican Congress, House is they'll come back. We will get [8:33] this done. And they do want to work with President Trump and for the American people. There's that. [8:39] We also want to get the Clarity Act done to make us the digital asset capital of the world. [8:45] That, you know, everyone says to me, well, you know, crypto is this or that. So all the nonsense [8:51] goes on offshore. If we bring it on shore, have U.S. best practices, a great regulatory framework like [8:58] we do with securities, like we do with commodities, then the, you know, that will be very important for [9:05] crypto. And there are a lot of other things that we got to get done before the summer break. [9:10] Secretary, do you have an update for us on tariffs? I know some of the tariffs that are in place [9:13] will expire in the coming weeks, right, after the Supreme Court decision. Was the president [9:18] planning on any changes in terms of the tariffs? So what's going to expire is what's called the [9:23] Section 122. It's a kind of an emergency five-month authority that we put on. It's a 10 percent [9:32] global tariff. And along with that, we have existing 301s and 232s. But right now, [9:39] to go back to the tariff structure, the deals that we've struck with countries around the world, [9:45] around the world, whether it's Japan, China, Europe, the whole EU, EU is willing to pay 15 percent [9:53] tariffs and take down the tariffs on us. It's an incredible deal. So what's happening now is [9:59] Ambassador Jameson Greer, U.S. trade representative, is doing studies Section 301. And if those studies [10:07] that are successful, those 301s will get recalibrated to the exact level of the trade [10:13] deals we had with the countries. Meanwhile, the Trump accounts have been incredibly successful [10:19] in terms of the conversation and the amount of demand out there. I will tell you that my niece [10:24] just had a baby and she's seven weeks old. And I'm encouraging them to sign up for the Trump [10:30] accounts. This was such a good idea. And you said in your remarks that financial literacy [10:33] has always been important to you. Same with me. It starts at home, doesn't it? [10:37] It does. It does. And look, your niece has no better role model. But for many people around [10:44] the country, 38 percent of American families have no exposure to our great equity market. [10:49] They don't participate in the innovation, in our economic engine. They don't understand our [10:55] great management. So with the Trump accounts, with the children who were born during President [11:02] Trump's administration, Treasury will cede those accounts with $1,000. But anyone with [11:08] children under 18 should open a Trump account because many of the great philanthropists are [11:12] also putting money in. Families can put up to $5,000 in per year per child. And many states [11:20] are going to participate. Corporations are going to participate. Comcast is participating. [11:25] Yes, it's such a great idea, Secretary. Thank you for that. [11:28] All right. The president and yourself have had such courage in terms of doing things that [11:34] past presidents, past Treasury secretaries would not do. I mean, it's countless. And [11:39] I want to talk a little about the potential for another courageous move, because here we [11:44] are at the Reagan Economic Forum. And 40-plus years ago, under President Ronald Reagan, mandatory [11:50] spending was one-third of all federal spending. Today, it's two-thirds of federal spending. Is that [11:56] something that the president is going to tackle? [11:58] I'll tell you, Maria, what we got to do, we got to get the short-term in order before we get the [12:04] long-term in order. So that we had a fiscal contraction for fiscal year 2025 that when I got [12:11] to Treasury, that the year before, we'd had the worst budget deficit when we weren't in war, [12:17] weren't in recession, 6.7 percent of GDP. We brought that down to about 5.5, 5.4 percent. [12:24] And I've talked about trying to get it down, something with a 3 in front of it by the time [12:31] the president leaves office. So we've got to get that under control before we can tackle the big [12:36] problems. [12:37] And because, I mean, if we're continuing to spend all this money on Medicare, Medicaid, [12:41] Social Security, we won't have any money left to spend on anything else, right? [12:46] Again, we got to work on the here and now. I always call it crawl, walk, run, [12:53] that we came in, that we were crawling. Now we're getting upright and starting to walk. [12:59] And, you know, I think once we solve this, we can think about running. [13:03] How soon do you expect some of those other things, putting oil and gas aside, [13:07] talking about fertilizer and memory prices and other things that are costly? [13:11] Okay. So fertilizer is a direct result of the straight being closed. A lot of the raw [13:17] materials coming out of there. So again, that's going to roll down. 75 percent of the fertilizer [13:23] needs for U.S. farmers had already been taken care of for this planting season. So that I am [13:30] confident that we will have ample fertilizer at a good price for the 27 planting season. And then, [13:38] you know, some of these, memory is just a function of demand. It's just a function of demand. [13:44] And Micron, thanks to President Trump, 100 percent expensing for their new factory [13:51] out in Virginia. You know, they're bringing it onshore. So it just means we have a boom. [13:58] I got to ask you about the $250 bill that the president is talking about in terms of putting [14:03] his image on the $250 bill. Is this really going to happen? [14:07] Well, we'll see. There's pending legislation in the House. If it passes, then we'll do it. [14:13] And, you know, Maria, I think it's fitting. President Trump is the president during our [14:19] 250th anniversary. That Calvin Coolidge was president during the 150th anniversary. And [14:25] there was a coin printed for him. And, you know, I think it's a great celebratory note for a great [14:32] president. And will we also have a coin with President Trump's image? [14:35] There's already a coin. There's already a coin. [14:37] There's already a coin. So Treasury, we have sketched it out, what it would look like, [14:43] because we have to prepare way in advance. And if the legislation passes, then we'll do [14:48] it. If it doesn't, we won't. [14:50] Now, what about your currency? Because you're – has that been printed yet? [14:55] Scott Besant signed dollars and currency in general. [14:59] It's been printed. The bills haven't been registered with the Federal Reserve. [15:03] You'll be seeing more on that probably in the next two weeks.