David Lawder
WASHINGTON (Reuters) – President-elect Donald Trump’s pick for Treasury secretary, hedge fund manager Scott Bessent, vowed to maintain the dollar’s status as the world’s reserve currency as he prepared to face questions from U.S. senators on Thursday about how he would implement Trump’s tax cut plans, tariff and deregulation.
Bessent’s testimony at a Senate Finance Committee hearing at 10:30 a.m. EST (15:30 GMT) will roil financial markets amid concerns — reflected in rising bond yields — that Trump’s policy plans could fuel inflation and spark a new global trade war which threatens financial stability.
The 62-year-old founder of Key Square Capital Management will have to present himself as a moderating influence on Trump’s more “extreme” plans, said David Wessel, director of the Brookings Institution’s Hutchins Center for Fiscal and Monetary Policy.
“What the markets and the business community want is to know that there’s an adult at the table who doesn’t think cutting taxes excessively and piling up debt is a good idea,” Wessel said. “And someone who doesn’t think all of Trump’s campaign promises about tariffs are good ideas.”
In prepared remarks released Wednesday night, Bessent laid out a vision for a “new economic golden age” that includes prioritizing strategic investments that grow the U.S. economy and making permanent Trump’s 2017 tax cuts for individuals and small businesses that expire in December. 31. 2025.
“We must secure supply chains that are vulnerable to strategic competitors, and we must carefully apply sanctions as part of a whole-of-state approach to meet national security requirements,” Bessent also said in remarks.
“And most importantly, we must ensure that the US dollar remains the world’s reserve currency.”
TARIFF REPRESENTATIVE
Bessent did not mention China in his prepared remarks, but was a strong supporter of Trump’s plans for sweeping tariffs ranging between 10% on all imports and 60% on Chinese goods.
In a Fox News op-ed a week before he emerged as the winner of a dramatic race to be Trump’s Treasury secretary in November, Bessent praised the tariffs as “a way to finally stand up for Americans” after decades of job losses from rising imports.
“Used strategically, tariffs can increase revenue for the Treasury, encourage businesses to resume production, and reduce our reliance on the industrial output of strategic rivals, especially China,” Bessent wrote.
TAX ISSUES
Finance Committee Democrats are expected to grill Bessent on his plans to extend the 2017 tax cuts for individuals and small businesses that expire at the end of this year. Budget forecasters estimate that it would add at least $4 trillion to the federal debt over a decade without savings elsewhere.
In his remarks, Bessent called on the Trump administration and Congress to implement “pro-growth policies to reduce the tax burden on America’s service workers and seniors.”
The latter policy relates to Trump’s campaign promises to lower the corporate tax rate to 15% from 21% for companies that make products in the United States, and to exempt tip and Social Security income from taxation.
Senate Finance Committee Democrat Elizabeth Warren released a list of 180 questions for Bessent to answer, including some challenging his previous claims that tax cuts could pay for themselves by generating more growth.
“Your expertise has been in making already wealthy investors even richer, not in reducing costs for families or strengthening the economy for all Americans,” Warren wrote in her letter to Bessent.
The Republican chairman of the Senate panel, Mike Crapo, called Bessent “one of the sharpest minds in the global financial industry.”
Crapo added in his own prepared remarks that Bessent “will have to work with Congress to preserve and build on the pro-growth Republican tax policies that have greatly benefited all Americans.”
QUESTIONS ABOUT THE INDEPENDENCE OF THE FED
Bessent grew up in South Carolina and went to Yale University before working on Wall Street, where he helped famed investor George Soros make more than a billion dollars betting against the British pound in 1992.
He launched Key Square in 2015, quickly amassing $4.5 billion in assets, which peaked at $5.1 billion in late 2017 but fell to $477 million six years later. Bessent has promised to sell his investments in Key Square to avoid conflicts of interest.
Markets will also be analyzing Bessent’s comments on Federal Reserve independence, given his previous advocacy of appointing a “shadow” chairman to the Fed’s board who would offer alternative policy guidance. Trump recently complained that interest rates are too high, despite the Fed’s three rate cuts last year.
