Treasury Secretary Scott Bessent has advised President Trump to provide investors with a clear plan to navigate the ongoing tariff downturn to prevent further escalation, according to a report by Politico. Bessent emphasized the importance of establishing clear and measurable goals to support dialogue, warning that failure to do so may lead to continued sell-offs in equity markets.
The Politico report highlighted Secretary Bessent’s concern about the conflicting rationales presented by the administration regarding the tariff increases set for April 9. The administration’s explanations have varied from using tariffs as revenue generators and negotiations leverage, to efforts in restoring manufacturing within the U.S., or even considering them as permanent measures.
A source conveyed Bessent’s warning to the President, stating, "Bessent’s view was ‘the markets will keep melting unless you shift,’” urging discussions around negotiations and clarifying the eventual objectives of these tariffs.
Since President Trump’s inauguration in late January, the S&P 500 index has decreased by 16%, resulting in a $3 trillion reduction in equity market value. This decline marks the most substantial 10-week drop under a new president since George W. Bush took office during the dotcom bust in 2001.
In response, billionaire hedge fund manager Bill Ackman, who has publicly supported Trump, appealed to the White House to avoid initiating a "global economic war against the whole world at once" and recommended postponing the April 9 tariff implementation.
A request for comment from the White House by Fortune was not answered by the time of publication.
The unexpected application of the tariffs contributed significantly to the market’s sell-off. Trump did not disclose the details of the tariffs until just before their implementation, catching Wall Street off guard, especially with the imposition of high tariffs on surprising territories, such as those largely populated by penguins.
UBS chief strategist Bhanu Baweja mentioned that investors assumed tariffs were merely a negotiation tool, similar to strategies previously employed with the NAFTA-successor USMCA five years earlier, rather than a permanent ideological stance. Baweja also noted that the tariffs were harsher than anticipated, resulting in a significant tenfold increase in tariff rates, surpassing historical figures not seen since the 1900s.
Investor concerns were heightened when new import duties were tied to trade imbalances unrelated to tariff reciprocity. Comments suggesting the possibility of pausing tariffs added to the confusion among investors.
The White House is currently maintaining a hardline stance, even as trading partners, including the European Union, seek compromise. Trump’s rejection of the EU’s offer to eliminate industrial goods tariffs if the U.S. reciprocated illustrates the current diplomatic landscape. However, Trump put forth a condition that could facilitate a negotiated resolution: Europe must agree to purchase $350 billion in U.S. oil and gas.
Recent statistics from the Bureau of Economic Analysis indicate the U.S. trade deficit with the EU has risen by 29% last year, reaching $161.1 billion, ranking it between deficits with Vietnam and Mexico, and considerably lower than the $263.3 billion deficit with China.
This report was originally published on Fortune.com.
