Name: Paul Gigot in Conversation with U.S. Treasury Secretary Scott Bessent
Uploaded: 2026-04-14T22:20:00Z
Duration: 25 min 20 s
Description: Speaking at WSJ Opinion Live in Washington, D.C., WSJ Editorial Page Editor Paul Gigot and U.S. Treasury Secretary Scott Bessent discuss economic uncertainties amid the war with Iran, the AI competition between the U.S. and China and President Trump's postponed summit with Xi Jinping in May.

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Speaking at WSJ Opinion Live in Washington, D.C., WSJ Editorial Page Editor Paul Gigot and U.S. Treasury Secretary Scott Bessent discuss economic uncertainties amid the war with Iran, the AI competition between the U.S. and China and President Trump's postponed summit with Xi Jinping in May. Photo: WSJ Opinion Live

https://m.wsj.net/video/20260414/d8fb20f3-9b33-44a4-9aef-fb333954755f/1/hls/manifest-hd-wifi.m3u8

Speaking at WSJ Opinion Live in Washington, D.C., WSJ Editorial Page Editor Paul Gigot and U.S. Treasury Secretary Scott Bessent discuss economic uncertainties amid the war with Iran, the AI competition between the U.S. and China and President Trump's postponed summit with Xi Jinping in May.

Paul Gigot in Conversation with U.S. Treasury Secretary Scott Bessent

Welcome, Mr. Secretary, thanks for doing this. And first, I just want to clear the air on one point. There was an editorial we wrote a while back you took some umbrage at. Not the first time that's happened in my career, but...

Won't be the last.

Yeah. You called us, I think you said, "The editorial board is run by grumpy old men." And just for the record, I can accept old, okay? I concede in my case that's true. But grumpy, I'm the epitome of cheerfulness.

I don't know, I think if you were in the movie, Walter Matthau would play you.

Paul: Ouch.

And I can say that maybe the women are grumpier.

No, I think Kevin Costner's my guy, just so again, look. So, today you launched Operation Economic Fury, which is part of the economic pressure on Iran that the quarantine on its exports involves. Tell us what specifically you're gonna do with this.

Well, so since last March, the president gave the order for maximum pressure campaign and we've started pressuring the Iranian assets around the world, cutting off their supply lines, which in December, culminated in one of their major banks going under, the Central Bank had to print money, large inflation, and then the riots that we saw out on the street, and to increase our negotiating leverage and finally put an end to the cash that is flowing into the IRGC coppers and into the country. We are partnering with our Gulf allies who, having been fired upon for almost 40 days, are much more willing to share the bank accounts of members of the Iranian regime in their countries. We are reaching out to banks, including Chinese banks, to remind them of that any Iranian goods and the purchases thereof are forbidden and that the dollars would be sanctioned and that we will press for secondary sanctions if there's a problem.

So, the Gulf countries, UAE and others, are done trying to use Iranian assets and accept them?

I believe that there's been a real step function change in their willingness to tolerate their neighbor, which, you know, one understood. But now, having been, I think Qatar's had 14% of their GDP destroyed with just a few missiles, UAE I think has taken over 1200 hits, and you know, Saudi, the same, so...

Hmm, interesting. So I wanna ask you something I don't think I've heard you comment on, which is a lot of talk in the markets about how Iran has been insisting that when it flows through the Gulf, that the oil be paid for in Renminbi, Chinese currency, or crypto, but not petrodollars, and that this is the Chinese and Iranian attempt to replace the dollar. What do you think of that effort, and is that at all realistic?

I think it probably imagines a coordination that doesn't exist. And I think that maybe the Chinese were paying the Iranians in RMB or CNY. And look, there's no doubt that the Chinese are trying to create a... I don't know if they want to be the reserve currency, but they're trying to push the US out of it. Difficult to be a reserve currency when you're not fully convertible and their capital controls. And you know, again, you know, with the RMB, I traded currencies pretty well for 35 years and...

Made a little money on it too.

A little here and there. But with the RMB, it's very difficult to tell what's the stable value, what's the equilibrium value, because it really exists in three equilibria. On an academic model, it'd be considered cheap. They've done a big internal devaluation, real estate's down, labor is down. On the other two equilibria, you have 1.4 billion people who want to get their money out of the country and the government's stopping that. And then the third equilibrium would be, what percent chance do you put that one day, they won't give you your money? And when you try to calibrate all three of those, it's very difficult to know the price.

All right. You said yesterday in an interview that you thought the economy would've grown 4% this year if we didn't have the war. What's your projection now, and what's your safety valve if somehow growth stumbles as this war carries on?

Look, I think the underlying economy remains strong. I think, you know, classical economic theory would tell you that there will be catch-up. I just can't plug in a day, a date certain when the war will end, how long it will take things to normalize. But what we can see is that core inflation continues to come down, and headline is just influenced by energy prices, and those will come down. But I do think that the growth could easily exceed three, three and a half this year still.

Still? Okay, wow. All right. The Congress is considering reconciliation 2.0, maybe 3.0, but let's assume that the economy is not as robust as you expect and it's, you know, bumping along. Do you wanna see any pro-growth provisions in that reconciliation bill? Economic measures?

I think there's nothing specifically that, you know, I have in mind that I wanna see. I think that there are a lot of things that will be working on a lag that, you know, if we think about the president's economic agenda, I always say it's a three-legged stool, trade, tax and deregulation. So trade, with a setback at the Supreme Court in terms of the tariff policy, but we will be implementing or conducting Section 301 studies so that the tariffs could be back in place at the previous level by beginning of July. But what we found, and it's counterintuitive, that a lot of corporates had held up some of their CapEx because of the IEEPA lawsuit that eventually made its way to the Supreme Court.

Right.

So now using Section 301, which has survived more than 5,000 legal challenges, they will be certain of what the tariff policy is. So I'm expecting we're already seeing a pickup in CapEx. You know, I get a lot of questions on the Sunday morning show from people who aren't as friendly as you, Paul, and they said, "Well, where's this factory bone?" And I said, "Well, you know, in my old days on Wall Street, you could push a button and a billion dollars could move. With corporate CapEx, there's a planning cycle, a decision cycle." And now we are starting to see construction jobs are picking up, CapEx intentions are picking up, so I think we will really see the CapEx and the construction kick in. And you know, again, I said last night that I think the Fed has been wrong on inflation and the core inflation is coming down. But I understand if they wanna wait till the data's clearer, but that will mean that interest rates should come down a lot more.

Still no manufacturing job increase, though. You haven't seen that.

It was last month.

A little bit, you know, a couple of... But not if you look at the six-month trend, or the three-month trend, even.

Yeah, Paul, three or six months is... You know, it's not like you pushing a button on your word processor. You know, it can't... I was just down in my hometown of Charleston, South Carolina, and Boeing, because of international orders, is going to expand their Dreamliner facility by 50%. It's 1,000 manufacturing jobs, but before that, it's 400 construction jobs.

All right. One thing a lot of folks, some folks in Congress float is the idea that in a reconciliation bill, they might want to index capital gains for inflation. After all, we've had a big inflation here, going back to the early Biden years. What do you think about that idea? Is that something you want?

Not now.

Not now?

Not now.

No? Any reason?

Well, why would we do it now and...

Big boost for the stock market.

Stock market's doing fine. I know you're not called the Main Street Journal, so... But you know, we're focused on Main Street for right now. And you know, I think that group has done well. 38% of American households don't own stocks or have any participation in the equity market.

But that means 62% of the public does.

They do, and they've done really well.

All right, let me talk about...

And I'm just gonna point out that the S&P is now higher today, it was effective yesterday morning, that is higher than when the bombing started on February 28th.

It's notable. So you mentioned the Fed. I want to ask you a particular, you got a big transition coming up, but Kevin Warsh's hearing at the banking committee in the Senate next Tuesday now I think it's been announced, but the timing on his confirmation is uncertain. Now, assuming for the sake of argument that Thom Tillis still holds out and says, "I'm not gonna confirm him until the legal case is done with involving the Fed." And mid-May comes around, Kevin Warsh hasn't been confirmed. The current chair's term formally expires. Who do you think should run the Fed at that juncture?

I'm gonna stay out of that. That they...

Jay Powell says he should be running it.

Well, again, that's unclear. You know, I think in terms of being the chair pro tem, he could be, Vice Chair Philip Jefferson could be, Chris Waller could be, lot of people could be.

I think the President of the United States probably has a preference.

I...

Probably not Jay Powell.

I think the President of the United States does have a preference, but, you know, we'll see what happens. I'm confident that Kevin will be in situ by then.

Well, can you tell us about conversations about that legal case, then? I mean, why should we... Why should that happen? Because right now, Tillis is holding a very firm line and he says, "I'm not gonna vote for confirmation unless this case goes away."

I think Senator Tillis believes that Kevin Warsh is an excellent candidate.

He has said that, but still no vote. I wanna ask you about something that, you know, Kevin Warsh has talked about a lot, and that is this idea of reducing the Fed's balance sheet of assets and a new accord between the Treasury and the Fed, where the Fed would basically get out of the business of fiscal policy, hand those assets to you in some fashion where you control them, you make the decisions about whether to hold MBS, mortgage-backed securities and whatnot, and they would just do monetary policy. Is that the kind of deal you could see yourself supporting?

I've talked a lot about the Fed's balance sheet. I've probably written 20,000 words on the Fed in the past 10 years. And the regime they're in now of plentiful reserves, it is very difficult to get to a much smaller balance sheet from here. It's also the size of the balance sheet pre-GFC, we all forget that there were very different banking regulations. And so, I think we will have to see a change in the banking regulations to shrink the balance sheet that will have to be the decision to go back to the ample reserves regime, where the banks get their reserves from one another. So I think it will be a long process. I'm not against it. And you know, I do think that we can think about more of a look through balance sheet in terms of, you know, duration and what does it look like, what are we doing with the QRA, our quarterly refunding announcement, and our quarterly, you know, our cadence with that. You know, what is the Fed doing? You know, I have said that I think QE, that one of the things I admire about the Bank of England is their QE policy. They step in during a market dislocation, they stabilize the market, and then they move away. They've done that several times. And by the way, I don't have insight into their balance sheet, but I think they probably made a lot of money on their bond trading, that the Fed was losing 100 billion dollars a year because they purchased so much at such terrible prices.

Those regulatory changes, are those something that the treasury can do through your own rule-making, or Fed rule-making, or do you have to go to Congress?

It could be done through the agencies.

Through the agencies.

Yeah.

Okay, well, that's interesting. All right, you've got a big trip to China coming up, and the president, the summit in May. What do you and the president want to see out of this summit when it comes to economics and trade from China? What's your ask?

Look, I don't think there's a big ask. I think we have great stability in the relationship now. Two leaders met in Busan, Korea in October. That agreement is working well. I give it a B-plus, A-minus on the Chinese side. So, if I go back to my professor days, good job, room for improvement. So I think we'll be perfecting that. I think that there are things that we can trade with each other, so we're gonna be looking at that, can we do some kind of a 30 by 30 or 40 by 40 billion agreement in terms of tariff-free goods?

Mutual purchases?

Mutual purchases. The president always asks for more ag purchases. And you know, I would think that the Chinese would be much more interested in American oil and LNG after their experience with the choke point in the Gulf.

That word stability seems to be important when you're talking about what the President wants out of this Chinese relationship now. And I have to say, it's notably different than the first term where the president was, you know, often criticizing China, imposing new tariffs. Is there a change in the thinking about the US-China relationship that you just want to kind of keep things on a more even keel, and China is not something that fundamentally we'd have to decouple from the economy or change fundamentally the relationship with China?

Well, I think a lot to unpack there. I think the word decouple is wrong. I think de-risk is a better word. So we want to de-risk in certain critical areas. A lot of that came to light during COVID. The Chinese were not reliable suppliers. They closed down their economy. But all the things you complain about are subsidizing the semiconductors, ship-building, rares. Those are strategic, and we have to reshore those. Medicines. The precursors for 80 or 90% of US medicines come from India and China, so we need to reshore that. So we want to de-risk. We do believe that the Chinese imbalances are getting excessive, very tough for the world to have a China with a trillion dollar trade surplus. We put up our tariff wall, the goods have gone to the rest of the world. So our trade deficit with China is down substantially.

But as you say, with the rest of the world, it hasn't gone down, it's gone up. When you talk to your counterparts on China and you make this point about their big surpluses in manufacturing, what do they tell you? "We have a lot of people to employ, we have to do this?"

Look, I just think that it's very difficult. I went to Japan first time in 1990, '91. I think I got there within a month of the peak of the stock market and the bubble economy. And I remember in 2002, thinking, "Well, it's been a decade. They've probably had enough of this." And then it wasn't until 2012 with Abe that they changed, so it took 20 years. So I've learned the Asian mentality is a bit slower-moving than ours. The Chinese are probably even slower-moving than the Japanese. I think in their heart of hearts, they know they have to do it, but they have a lot of constituencies, the state-owned enterprises, they're running a very large aggregate budget deficit, probably 10% of GDP, so...

All right, let's talk a little bit about the current competition on artificial intelligence between the US and China. I'd really like to hear your view because we had another report out today by HAI, which does an annual report about AI, and they say that the United States' lead is essentially over, that we're now at parity. Where do you think we are in terms of the competition with China?

I strongly disagree with that. I think that it's moving quickly, but we are three to six months ahead, and couple of factors there is the way the compounding of these models of learning...

Works?

Works. This anthropic mythos model was a step function change in abilities, learning, capabilities. And if you think you go from... It's all logarithmic. You go from X to the 10th power to X to the 12th, and then it was very difficult to catch up. And also you can see the US compute share. So it's not only what do you have in the software, what's your ability to run it, what's your ability to generate tokens? So...

Those are semiconductors, the advanced chips as well.

A lot of that.

A lot.

And you know, I've seen studies that say that in a few years, the US is gonna have 70 or 80% of the global computing power. So we were in the thirties, now I think we're in the fifties, and we're well on our way.

But that puts all the more focus on production fabs for semi-advanced chips in Taiwan. How much progress have we made in diversifying our production lines, bringing more back to the United States? It seems like we're still very dependent on TSMC.

Oh, well, we're very dependent. 90% of the high-value chips are still made on the island of Taiwan. The Biden CHIPS Act, no money went out the door. Nothing was created.

A lot went out the door for New York State with Chuck Schumer, I think.

I think you'd be surprised to see where some of the family members were, but... And former staffers.

That's interesting. We should pursue that.

Yep. But we are moving as quickly as we can, and I think that that will also be a step function change. Big facilities being built in Arizona, but it's a big ecosystem. So the Taiwanese had the history, but they really had the ecosystem. They have this just circuit of technicians with master's degrees in chip technology, just because they've been there so long. So we have to not only build the fab, you have to surround it with all the suppliers and be able to train the workforce.

The other problem is the workforce. You know, you talk to the CEOs of some of these companies and they tell you, "We just have a terrible time finding skilled workers for these positions and that's why some of the investment has slowed." Do we really have to improve our legal immigration system to allow more talent to come in instead of putting more barriers up?

I think that we... I think there were a lot of unfortunate aspects to the Biden, the open borders, but I think one of them is the backlash against all immigration, legal and otherwise, and look, there are a lot of aspects of the H-1B system that are not robust, some would call it a scam, and those are not high-value jobs. But should we create a level, or should we do something where the workers come for X number of years, train our workers, and then maybe go home? Sure.

But with your control of the border, nobody's really coming in anymore. Even post, you know, ICE is doing whatever it's doing. I think something like a million illegal migrants may be out of the country and... Two million? Okay. That's a big number.

Yep.

But we need talent. And is there any appetite in the White House... I mean, the president sometimes talks about it, that he would like to see it. Is there any appetite to make this a priority, or at least part of the legislative agenda, if not this year, maybe after the next Congress?

Well, you know, we'll see. All I keep hearing about is the AI apocalypse for jobs, so I don't know if we should wait...

Paul: Not from us.

Well, not from you, but from others.

But do you believe that? You don't believe in the AI apocalypse, do you?

I don't believe that AI is gonna take people's jobs. I think people who know how to use AI is gonna take people's jobs.

Well, is it gonna be a net negative for the labor force?

No. Look, in the history... I am mercifully not an economist, I'm an economic historian. So in the history of economies, innovation always leads to more jobs. I think we'd agree on that.

I would agree with that. And on that optimistic note, I want to thank you, Mr. Secretary, for being here. It's been enlightening and I sure appreciate it. Thank you. He's been generous with his time. Let's give him a big hand.

Thanks.

WSJ Opinion: Paul Gigot in Conversation with U.S. Treasury Secretary Scott Bessent

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