What Scott Bessent, Trump’s pick for Treasury Secretary, means for markets

Scott Bessent is stepping into a storm. Trump’s pick for Treasury Secretary has a lot on his plate: the government’s $29 trillion debt, expiring tax cuts, trade wars, booming crypto and stock markets, and even the Federal Reserve’s future.

Bessent, who runs Key Square Group, is no stranger to big bets. He’s a hedge fund guy through and through. But now, his job isn’t just making money for clients.

It’s holding the U.S. economy together while helping Trump push through his vision for a “revitalized America.” If the Senate signs off, Bessent will have the power to move markets, negotiate trade deals, and steer fiscal policy.

The man has opinions. On the Federal Reserve, tariffs, and even the strength of the U.S. dollar, he’s got plenty to say. He also knows how to make waves. Whether his approach works or tanks the economy is anyone’s guess.

One thing’s certain: his plans will have effects on markets.

The Federal Reserve, Bessent’s way

Trump has never hidden his frustration with the Federal Reserve, and it seems Bessent feels the same. Forget independence—Trump wants the White House to have a say in monetary policy.

Bessent has criticized the Fed’s decisions before, especially the jumbo rate cut in September. “If you were concerned about the integrity of the institution, you would not have done it,” Bessent said. He slammed the move, saying it damaged the Fed’s reputation for no real reason.

Powell’s term as Fed Chair ends in May 2026, and Trump will likely pick his replacement. Bessent has floated an idea: create a “shadow Fed chair” to take the reins early.

“You could do the earliest Fed nomination and create a shadow Fed chair. Based on forward guidance, no one is really going to care what Jerome Powell has to say anymore,” Bessent said. He argues that announcing the next chair now would calm markets and make Powell irrelevant.

Bold? Yes. Controversial? Absolutely.

Trump could also fill three other Fed board seats in the next four years, giving him even more control over the central bank. Bessent’s involvement in shaping this new Fed will likely redefine how monetary policy is handled in the U.S.

Tariffs aren’t just taxes to Bessent

If you thought tariffs were just trade tools, think again. For Trump and Bessent, they’re weapons—economic and political. Trump has promised tariffs as high as 20% on foreign goods and even higher for Chinese imports. Some think these are just scare tactics, but Bessent takes them seriously. In a November op-ed, he called tariffs a necessary move.

“For too long, the conventional wisdom has rejected the use of tariffs as a tool of both economic and foreign policy,” Bessent wrote. He compared Trump’s tariff strategy to Alexander Hamilton’s early U.S. economic policies. Bessent believes tariffs can protect American jobs and businesses, while also achieving foreign policy goals.

For example, he sees tariffs as a way to pressure allies into spending more on defense or cooperating on immigration and fentanyl trafficking. He also thinks tariffs can stop military aggression. Love or hate the idea, Bessent clearly sees tariffs as more than taxes—they’re leverage.

Critics argue tariffs raise costs for consumers and escalate trade wars. But Bessent seems willing to take that risk. His support for Trump’s aggressive stance on tariffs signals more trade battles ahead, especially with China.

Markets and the dollar

The Treasury Secretary doesn’t usually take credit for market performance. After all, what goes up must come down, and no one wants to own a crash. But Trump loves to tie his policies to market rallies, and Bessent is following suit.

In a Wall Street Journal op-ed, he said, “Markets are signaling expectations of higher growth, lower volatility and inflation, and a revitalized economy for all Americans.”

He pointed to a rare rally in equities despite rising interest rates, calling it proof that Trump’s agenda will drive growth without causing inflation. Markets, according to Bessent, have embraced the Trump economic vision.

On the dollar, things get tricky. Trump wants a strong dollar to maintain its global reserve status, but he also wants it weak enough to boost U.S. manufacturing. Bessent knows this balance won’t be easy.

“If you have good economic policies, you’re naturally going to have a strong dollar,” he said in October. He doesn’t believe in actively weakening the dollar but thinks a market-driven depreciation is possible if inflation drops and interest rates fall.

Bessent also noted that Trump’s election triggered the largest one-day dollar rally in over two years. He framed it as a sign of global confidence in U.S. leadership and the dollar’s status. But managing currency policy while juggling tariffs and inflation will test his skills.

On crypto, he said:

“I have been excited about Trump’s embrace of crypto and I think it fits very well with the Republican Party, the ethos of it. Crypto is about freedom and the crypto economy is here to stay. Crypto is bringing in young people, people who have not participated in markets.”

Debt and taxes: Fixing a $29 trillion problem

The U.S. debt is massive. At over $36 trillion, it’s a problem Bessent will have to tackle head-on. Trump wants to shrink the federal deficit to 3% of GDP from 6.2%.

How? Deregulation, privatization, and cutting programs like the Inflation Reduction Act. “I think a priority is going to be turning off the IRA,” Bessent said.

He’s also criticized Treasury Secretary Janet Yellen for short-term borrowing strategies. “She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management,” he said in June. Bessent favors issuing ultra-long-term bonds to lock in low rates for decades. 

“When rates are very low, you should extend duration,” he argued. Tax cuts are another big item on Bessent’s to-do list. Many of Trump’s 2017 cuts expire in 2025, and extending them will require negotiations with Congress. 

Bessent has already started talks with Republican lawmakers. “There’s a big appetite for pay-fors in the Republican Congress,” he said. Expect a fight over how to fund these cuts without adding to the deficit.

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