I’ve been relaying this information to CEOs who have reached out to me since I spoke with U.S. Treasury Secretary Scott Bessent earlier this week (see video above). I thoroughly enjoyed my 23-minute conversation with the Treasury Secretary. I learned a lot in a short period of time and I’m very grateful for his time.
He has a level head and a deep understanding of market history and how markets work – no doubt a byproduct of his decades in the hedge fund industry. Of course, these traits are a boon to a Treasury Secretary if things take a turn for the worse (like a financial crisis).
Ultimately, though, I think the cloud of uncertainty hanging over markets around tariffs – a key headwind facing the market – should persist in the near term. Therefore, any stock market rally, such as the recent electronics tariff exemption, should be viewed as short-lived.
At the center of this cloud of uncertainty is, of course, China. The two superpowers seem far apart in terms of reaching some form of trade truce.
When I asked the Secretary of State if he had spoken to his Chinese counterpart, he responded:
We had an introductory call a few months ago. No contact since then. I’m not sure who’s coming from China next week — it’s a big week in Washington, IMF World Bank week. I know China is sending a finance official, probably the governor of the People’s Bank of China. So they’re coming. You know, I might bump into them. We don’t have anything scheduled,” Bessant said.
Wow, bump into them in the hallway? That’s it? Not great.
Then, on whether there will be tariff agreements with up to 130 countries at the end of the 90-day pause, there was this response:
“Let’s not talk about China. The United States has 15 large trading partners. Let’s not talk about China. The United States has 14 trading partners, and we’re moving very quickly to set up a process for these 14 largest trading partners, most of which have large deficits. So, in 90 days, can we come up with a complete document, a formal legal document? Unlikely,” Bessant said.
He did note, however, that a framework could be worked out during the pause.
While all of this is happening, the U.S. government is still restricting relations with China. Look at this week’s AI chip restriction news, which shook AI leaders Nvidia (NVDA) and AMD (AMD). ) of its market cap. Nvidia will be forced to take a $5.5 billion charge and AMD will be forced to take an $800 million charge.
This is a tough blow for investors to take. It highlights the magnitude of the policy risk, which is still not fully priced in even though bulls are suggesting otherwise.
After this interview, I will be speaking to a wide range of CEOs over the next two weeks. Some will speak immediately after the earnings call, some before the call (which you can now listen to directly on Yahoo Finance), and some will speak at the reception.
I am curious what you want to learn from these power brokers.
Personally, I am curious to know how executives plan to price products and services in the era of tariffs. This could have a significant impact on consumer demand and Fed policy this year.
I am also watching to see how committed they are to their existing staffing in this uncertain environment. If a company is forced to pay high tariffs and consumers are shrinking, CEOs will surely make significant cuts – usually through layoffs.
