Cronyism, Capitulation and Utter Chaos

And what the hell was Scott Bessent doing briefing Morgan clients?

Hitting the road today, but I have time for a note on the news that moved markets yesterday. Bloomberg reports:

US Treasury Secretary Scott Bessent told a closed-door investor summit Tuesday that the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate.

That de-escalation will come in the very near future, Bessent said during an event hosted by J.P. Morgan Chase in Washington, which wasn’t open to the public or media. He characterized the current situation as essentially a trade embargo, according to people who attended the session.

Investors liked this report, but it was, if you think about it, deeply disturbing on two levels.

First — and why aren’t more people saying this? — what the hell was the Treasury secretary doing giving a closed-door briefing on a significant policy change that hadn’t yet been officially announced? Isn’t that a setup for large-scale insider trading? Indeed, attendees at that conference surely made market bets before Bessent’s remarks became public.

And since when are major policy announcements by government officials made off the record to closed private-sector meetings? One even wonders whether Bessent was announcing policy or making it: Did Trump back him up only after the fact?

The content of his remarks aside, what was Bessent even doing at this event? Senior government officials aren’t supposed to be helping investment banks entertain their clients.

Was Bessent paid for his appearance? That would have been inconceivable under any previous administration, but now God knows. Or are we now entering an era in which companies that do favors for Trump and co., either in the form of money or support for their policies, get lucrative insider briefings?

Put it this way: New York Times conflict of interest rules would have prohibited me, as an opinion writer, from talking to a closed-door session at J.P. Morgan. For the Treasury secretary to do so — especially when announcing a major policy change — is a huge ethical breach.

Let’s also talk about the substance of what Bessent reportedly said. Namely, he declared that the enormous tariffs Trump imposed on China will soon be reversed. Those tariffs are indeed crazy, amounting, as Bessent said, to an embargo.

But this is an extraordinary reversal — a capitulation equivalent to surrender. And bear in mind that the damage being done by Trump’s tariffs comes not just from how high they are but from the uncertainty they’re creating. That gigantic China tariff was announced just two weeks ago. Now Trump says, “we will be very nice and they’re going to be very nice.” How can any business make plans in this kind of environment?

Oh, and it seems likely that Trump will announce trade “deals,” possibly with China, probably with other countries, that aren’t actually deals — just “memorandums of understanding” that offer few specifics. He and Bessent will try to spin this as a policy triumph, but all that will really have happened is a confirmation that you can’t trust anything this administration says, including its threats.

As the same time Trump has made a humiliating climb-down on Jerome Powell.

While news media and some investors may still be credulous enough to believe Trump’s boasts, harder-headed players will look at his U-turns and conclude that he runs away when confronted. Why would China be "very nice” now that it knows that Trump can be rolled? On the contrary, China will be even less likely than before to make concessions. And other countries will be more willing to stand up to Trump and more likely to make deals with Beijing.

We are, in short, in a worse position than we were before Trump began his tariff bluster. Being a cowardly, loud-mouthed bully presiding over utter chaos is not an effective negotiating strategy.

MUSICAL CODA