In a wide-ranging interview with Bloomberg Television on Friday, Treasury Secretary Scott Bessent predicted the combination of the administration’s pro-growth trade policies, tax cut agenda, and deregulation would soon lead to a pickup in activity. During the 2024 campaign, Trump promised to improve the lives of lower- and middle-income voters in communities left behind by globalization.

“I expect certainly by this time next year we will be north of three [percent growth], and that we will be turning the corner toward the end of the year,” Bessent said. 

The only concern he said he had was that courts and Democratic legislators might throw sand into the works, preventing for example the accelerated permitting needed to literally power the ongoing boom in energy-hungry AI data centers with new utility projects. 

During the first three months of this year, the U.S. economy shrank at an annualized rate of 0.3% as businesses stocked up on imports in advance of punitive tariffs levied by the Trump administration. Pessimism over the global outlook subsequently soared among CEOs polled in April by Fortune and Deloitte.

During the interview, Bessent spoke about a number of key economic issues the administration is currently pushing, such as the tax cut package Trump calls the “one big, beautiful bill.”

Reducing fiscal deficit remains challenging in near term

One key aspect of the bill that can accelerate growth is the ability of domestic manufacturers to fully expense equipment rather than depreciate it over time, lowering their taxable income, Bessent said.

That, combined with savings from a planned cut in the cost of pharmaceuticals, would reduce the deficit as a percentage of the overall economy, he added.

“President Trump has made this very bold proposal on prescription drug pricing, which could save HHS substantial amounts of money,” Bessent said.

Nonetheless, there are estimates from the Congressional Budget Office that the overall cost will push deficits higher by a cumulative $3.8 trillion. Bessent acknowledged next year’s budget deficit could well exceed his 3% of GDP target even in an optimistic scenario.

“We didn’t get here overnight, we’re not going to get there tomorrow,” he said. “What I’ve talked about is something with a three in front of it by 2028.”

Bessent optimistic on slew of new trade deals in next two weeks

The Treasury secretary has personal responsibility for leading trade talks held in conjunction with U.S. trade representative Jamieson Greer. After hitting pause on the “reciprocal” tariffs—a misnomer since they are based on deficits rather than import duties levied on U.S. goods—the administration promised 90 deals in 90 days. So far there’s only been one reached with U.K. Prime Minister Keir Starmer that experts criticized as thin on specifics.

More are on their way, however, according to the Treasury secretary.

“We have 18 important trading partners, so what everyone should really focus on are those,” Bessent said. “We’ve done a deal with the U.K.; my sense is over the couple of weeks we’re going to have several large deals announced.”

Germany to play a key role in Trump’s EU trade conflict

One exception to that, however, appears to be the European Union. The White House voiced its clear frustration with Brussels by unilaterally announcing that 50% tariffs would be levied on all imported goods early next month. That level surpasses the 20% Trump himself claimed would be fair and reciprocal, and comes well before the 90-day pause is over in early July. (After a phone call with European Commission President Ursula von der Leyen on Sunday, Trump delayed that 50% tariff until June 9.)

A key actor in the conflict is Germany, a major exporter heavily reliant on access to the U.S. market. Relations between Trump and the government in Berlin traditionally have been very poor—a fact not helped by Vice President JD Vance scolding the state in February for shutting out the far-right nationalist AfD party. 

Bessent struck an optimistic tone, however, praising his German counterpart after a meeting this week with new Finance Minister Lars Klingbeil at the G7 meeting in Canada.

“He was very responsive. I think that the new chancellor, [Friedrich] Merz, is going to give an opportunity for a U.S.-Germany reset, so I’m very optimistic that perhaps Germany can help push the EU forward here,” he said.

Persistently high Treasury yields

Bessent pushed back against the notion that foreign investors are losing their appetite for U.S. Treasuries, arguing the recent rise in the cost of borrowing is reflective of a broader trend impacting demand for government bonds affecting other countries, including Japan. 

He argued the administration’s vocal support for digital assets could lift demand for U.S. sovereign debt, estimating $2 trillion in fresh demand from a growing stablecoin supply that use Treasuries as a reserve.

Further relief could come this summer, he said, when financial regulators at the Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are expected to approve changes to the so-called Supplementary Leverage Ratio. The SLR requires all lenders to hold a minimum 3% of their capital against their overall exposure irrespective of risk profile, with systemically important institutes subject to a 5% rule.

“Banks are being penalized for holding Treasuries,” he said, arguing charges imposed to hold a risk-free asset like U.S. government bonds make little sense.

Privatization of U.S. mortgage giants Fannie Mae and Freddie Mac

Trump recently pushed the idea of floating shares in the formerly government-sponsored agencies Fannie Mae and Freddie Mac. The duo played a key role greasing the wheels of the U.S. housing market by guaranteeing roughly seven out of every 10 U.S. mortgage loans that banks extend to homeowners, according to the National Association of Realtors. Weeks before Lehman Brothers collapsed, both were seized in September 2008 and nationalized to prevent further contagion.

Bessent said the administration would turn its attention to their partial privatization once its tax and trade agendas were achieved. He said a key prerequisite would be whether the government could phase out ownership in such a way as to prevent the spread between rates on mortgages over risk-free Treasuries from widening. 

“There are several ways to do it and we are exploring it,” he said.