“Home Depot and Amazon said they are not passing on tariff costs,” Bessent said. “There is this new Tariff Derangement Syndrome on your side…many of you are upset that there is no inflation. There has been no inflation; there will be no recession because of tariffs.”
One of the best exchanges of the day came from Sen. Maria Cantwell (D-WA). She asked Bessent if he “believed in a rules-based trade regime.”
In essence, the answer was no.
“I believe the international trade system has failed the American worker, Senator,” Bessent told Cantwell. “For too long, we have adhered to a system that has not worked. I’ll quote something widely attributed to Albert Einstein here who told us that ‘doing the same thing again and again and expecting a different result is the definition of insanity.’ ”
Cantwell pushed back. Her argument was that if we promote rules-based trade, as the U.S. has done since the end of World War II, “we win” because “we get more people on our side about the rules.” Her point was that if trade has no rules, everything becomes ad-hoc and unreliable. “Do you think the administration believes in the multilaterals?” she asked, not singling out any one multilateral institution. The one that would make the most sense in this case is the World Trade Organization. When China entered the WTO, the U.S. got what MIT economists called the “China Shock” as American companies of all sizes outsourced to China and laid off millions.
Bessent said those institutions have failed. “We have these gigantic trade deficits. We had the China Shock. American workers were left behind and suffered.”
Bessent also spent much of the three hour hearing defending the One Big Beautiful Bill Act (H.R. 1), saying it codifies tax cuts. He said if the ‘Tax Cuts and Jobs Act’ expires next year, it would be “cataclysmic.”
Though unspoken at the hearing, the implication is clear: higher taxes on businesses—combined with tariffs—would raise costs to a point where businesses will outsource or import.
Current global tariff rates are 10%. Given the strong dollar, a 10% tariff does not make imports less attractive. A 10% tariff is mainly used for revenue, something Bessent said is needed if Congress is unwilling to cut government spending.
Sen. Catherine Cortez Masto (D-NV) asked him if “tariffs are a sufficient way to generate revenue?”
“Yes. And it can rebalance decades of trade problems,” he responded.
Democrats remain in opposition to tariffs, but not in opposition of reshoring.
“You keep talking about using tariffs to bring jobs back to the country, which I agree with,” Cortez Masto said. “What types of jobs are you looking to bring back?”
Cortez Masto’s line of questioning targeted the idea that the United States shouldn’t be spinning yarn and making socks, but should only be making space craft and AI hardware.
“We want to bring back semiconductors and steel,” Bessent said. “There are other strategic industries as well, like pharmaceuticals. But I would say this is about bringing back a whole array of manufacturing jobs.”
Cortez Masto also said small businesses are telling her that there is “tariff chaos,” a constant buzzword on Capitol Hill for all who oppose Trump’s trade policies. She did not say that these are all small businesses who built their companies on Chinese imports, or cheap Asian labor. “I know you are looking at short term pain for long term gain but these companies won’t be around for long because they are being squeezed by tariffs,” she said.
Bessent said the government was looking out for small businesses, highlighting tax cut permanence in H.R. 1. “Small business optimism just hit a record,” he reminded her.
Bessent Defends Tariffs in Senate Hearing, Calls Critics Sufferers of “Tariff Derangement Syndrome”
Treasury Secretary Scott Bessent stepped into somewhat hostile territory in the Senate Finance Committee hearing on Thursday. But despite dramatic criticism from Ranking Member Ron Wyden (D-OR) and other top Democrats on the Committee, Bessent took an early victory lap on tariffs, highlighted the importance of making the ‘Tax Cuts and Jobs Act’ permanent, and predicted more investment in U.S. manufacturing would lead to economic growth and increased tax revenue.
Some of the attacks directed at Bessent were poorly grounded.
“The Treasury Secretary does not think that Americans pay tariffs,” Wyden said. “But all of the food and medical bills are going up.”
Bessent had at least two lost opportunities here. On this one by Wyden, Bessent could have pointed out that medical insurance does not change because a hospital has to pay more for medical devices. Agricultural imports—especially from Mexico and Canada—are duty-free under the USMCA, with rare exceptions tied to seasonal safeguards or quota thresholds.
Food inflation is down in April below the core inflation rate. Most of the food inflation in the last several months has been caused by high egg prices. Higher egg prices were due to the USDA ordering the culling of millions of hens to fight bird flu in 2022. This policy continues to this day.
Wyden also said companies large and small were raising prices because of the April 2 Liberation Day tariffs.
“A number of analysts have said these tariffs will hit Americans like a wrecking ball,” Wyden said, citing two academic studies. “Major companies like Ford have said they will raise prices and some companies have already raised prices. But you said that Walmart will be absorbing some of the tariffs and some may get passed onto consumers”
Bessent had to speak over Wyden numerous times, telling him he was “cherry picking” examples of companies having to pay more, where the overall impact shows that prices are not rising. Bessent also missed a chance to note that Ford, in fact, said it would not raise prices and that it would give new Ford buyers the employee discount. Sen. Wyden picked the wrong example.
WATCH: CPA Economists Discuss the Latest Inflation Data and the China "Trade Deal"
“Home Depot and Amazon said they are not passing on tariff costs,” Bessent said. “There is this new Tariff Derangement Syndrome on your side…many of you are upset that there is no inflation. There has been no inflation; there will be no recession because of tariffs.”
One of the best exchanges of the day came from Sen. Maria Cantwell (D-WA). She asked Bessent if he “believed in a rules-based trade regime.”
In essence, the answer was no.
“I believe the international trade system has failed the American worker, Senator,” Bessent told Cantwell. “For too long, we have adhered to a system that has not worked. I’ll quote something widely attributed to Albert Einstein here who told us that ‘doing the same thing again and again and expecting a different result is the definition of insanity.’ ”
Cantwell pushed back. Her argument was that if we promote rules-based trade, as the U.S. has done since the end of World War II, “we win” because “we get more people on our side about the rules.” Her point was that if trade has no rules, everything becomes ad-hoc and unreliable. “Do you think the administration believes in the multilaterals?” she asked, not singling out any one multilateral institution. The one that would make the most sense in this case is the World Trade Organization. When China entered the WTO, the U.S. got what MIT economists called the “China Shock” as American companies of all sizes outsourced to China and laid off millions.
Bessent said those institutions have failed. “We have these gigantic trade deficits. We had the China Shock. American workers were left behind and suffered.”
Bessent also spent much of the three hour hearing defending the One Big Beautiful Bill Act (H.R. 1), saying it codifies tax cuts. He said if the ‘Tax Cuts and Jobs Act’ expires next year, it would be “cataclysmic.”
Though unspoken at the hearing, the implication is clear: higher taxes on businesses—combined with tariffs—would raise costs to a point where businesses will outsource or import.
Current global tariff rates are 10%. Given the strong dollar, a 10% tariff does not make imports less attractive. A 10% tariff is mainly used for revenue, something Bessent said is needed if Congress is unwilling to cut government spending.
Sen. Catherine Cortez Masto (D-NV) asked him if “tariffs are a sufficient way to generate revenue?”
“Yes. And it can rebalance decades of trade problems,” he responded.
Democrats remain in opposition to tariffs, but not in opposition of reshoring.
“You keep talking about using tariffs to bring jobs back to the country, which I agree with,” Cortez Masto said. “What types of jobs are you looking to bring back?”
Cortez Masto’s line of questioning targeted the idea that the United States shouldn’t be spinning yarn and making socks, but should only be making space craft and AI hardware.
“We want to bring back semiconductors and steel,” Bessent said. “There are other strategic industries as well, like pharmaceuticals. But I would say this is about bringing back a whole array of manufacturing jobs.”
Cortez Masto also said small businesses are telling her that there is “tariff chaos,” a constant buzzword on Capitol Hill for all who oppose Trump’s trade policies. She did not say that these are all small businesses who built their companies on Chinese imports, or cheap Asian labor. “I know you are looking at short term pain for long term gain but these companies won’t be around for long because they are being squeezed by tariffs,” she said.
Bessent said the government was looking out for small businesses, highlighting tax cut permanence in H.R. 1. “Small business optimism just hit a record,” he reminded her.
Bessent said that there is no strategy to work with allies to isolate China, or coordinate tariff action at this time. He hinted it might come later, but said existing trade frictions between the U.S. and allied trade partners need to be fixed first. “I think this is a multi-step process. Our allies have taken advantage of us, too. The EU has been very intractable in negotiations.
Canada is now doing a retroactive digital services tax to charge our tech companies. We will eventually iron this out. When we put up this tariff wall on China, I warned them that this merchandise is going somewhere and unfortunately for them it is going there. We have to get fairer trade with our allies before we can all reset China trade relations.”
Bessent may be too optimistic about the new China trade agreement from his London trip last week, but in his role, he has little choice. His message to the Senate was consistent: tariffs are not going away, and neither is the goal of rebuilding domestic industry. Despite bipartisan discomfort over trade tensions, Bessent showed no signs of retreating on tariffs—instead, he framed them as a long-term strategy that’s already paying off. His Democratic Party critics may see chaos, but Bessent sees a recalibration in motion and that is precisely the right thing for the Treasury Secretary to be focused on.
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