No Deals? Bessent Says Tariffs May Snap Back to Reciprocal Levels

• Treasury Secretary Scott Bessent warned that tariff rates will revert to “reciprocal” levels for 18 key U.S. trading partners if they fail to negotiate trade deals within a 90-day period, emphasizing the administration’s aggressive stance on trade.
• Walmart (WMT) flagged potential price hikes due to tariff-related costs but was urged by President Trump to absorb these expenses, with Bessent downplaying inflation risks after discussions with the retailer’s CEO.
• Trump criticized Federal Reserve Chairman Jerome Powell for delayed rate cuts and highlighted logistical constraints in trade negotiations, with tariff rates for trading partners to be set in the coming weeks.

President Donald Trump’s aggressive trade and economic policies are reshaping the global landscape, with significant implications for U.S. businesses and international relations. Treasury Secretary Scott Bessent, in a Sunday CNN interview, underscored the administration’s commitment to resetting tariff rates to “reciprocal” levels for countries failing to secure trade agreements within a 90-day negotiation window. This approach targets 18 key U.S. trading partners, with Bessent warning that without good-faith negotiations, tariffs could revert to their April 2 levels. The strategy reflects Trump’s broader push to prioritize American economic interests, leveraging tariffs as both a negotiating tool and a punitive measure.

The tariff debate has sparked concerns about consumer prices, particularly at major retailers like Walmart (WMT). On Thursday, Walmart indicated that escalating tariff costs could force price increases for shoppers as early as this month, citing disruptions in global trade triggered by Trump’s policies. The company, like others, opted not to provide profit guidance amid the uncertainty. However, Bessent downplayed fears of widespread inflation, describing Walmart’s warning as a “worst-case scenario” after discussions with CEO Doug McMillon. Trump himself addressed the issue directly on Saturday, telling Walmart to ‘eat’ the tariff costs rather than pass them on to consumers, a directive that underscores the administration’s expectation for businesses to align with its economic agenda.

Beyond trade, Trump’s economic vision includes pressuring the Federal Reserve for monetary policy shifts. On Saturday, he reiterated criticism of Chairman Jerome Powell, calling for interest rate cuts “sooner, rather than later.” Labeling Powell as “legendary for being Too Late,” Trump expressed frustration with the Fed’s cautious approach, suggesting it risks undermining economic momentum. This stance, voiced shortly after a Middle East trip, aligns with Trump’s broader narrative of urgency in addressing domestic and global economic challenges.

The administration’s trade strategy, however, faces logistical constraints. On Friday, Trump acknowledged that the U.S. lacks the capacity to negotiate deals with all trading partners simultaneously, despite widespread international interest. Speaking during a meeting with business executives in the United Arab Emirates, he emphasized fairness in setting tariff rates, which will be finalized in the coming weeks. This measured approach contrasts with the administration’s aggressive rhetoric, highlighting the complexity of balancing bilateral negotiations with global economic stability.

Walmart’s predicament exemplifies the broader ripple effects of Trump’s policies. As the world’s largest retailer, its decision to forego profit guidance reflects the uncertainty facing corporate America. The company’s warning about potential price hikes this month underscores the immediate impact of tariffs on supply chains and consumer goods. Yet, Bessent’s reassurance, backed by direct dialogue with Walmart’s leadership, suggests the administration is actively managing corporate concerns to mitigate inflationary pressures.

Trump’s tariff and trade policies draw from a protectionist playbook, rooted in the belief that reciprocal trade terms will strengthen U.S. economic sovereignty. Historical data supports the effectiveness of targeted tariffs in spurring negotiations, as seen in the 2018-2019 U.S.-China trade talks, which led to the Phase One agreement. However, the current approach, with its 90-day deadline and focus on 18 partners, is unprecedented in scope and urgency. The administration’s ability to secure favorable deals will depend on its diplomatic agility and the willingness of trading partners to meet U.S. demands.

The Federal Reserve, meanwhile, remains a focal point of Trump’s economic critique. His call for swift rate cuts aligns with his goal of sustaining economic growth amid trade disruptions. While the Fed operates independently, Powell has signaled openness to rate adjustments based on economic data, with inflation and employment metrics guiding decisions. Trump’s public pressure, however, introduces political noise into monetary policy discussions, potentially complicating the Fed’s calculus.

As the U.S. navigates this high-stakes period, the interplay of tariffs, trade negotiations, and monetary policy will shape economic outcomes for businesses and consumers alike. Walmart’s cautious outlook reflects the immediate challenges, while Bessent’s optimism points to a belief in the administration’s ability to thread the needle. With tariff rates set to be clarified soon, the global economy awaits the next moves in Trump’s bold economic gambit.

WallStreetPit does not provide investment advice. All rights reserved.

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