The Senate Finance Committee will hold a confirmation hearing for Scott Bessent, President-elect Donald Trump’s nominee for Treasury secretary, this week. Here are four areas relating to his views on international trade and investment that senators should consider exploring.
1. What is his perspective on the role that international investment plays in the U.S. economy?
Background: The United States has been the largest recipient of foreign direct investment in the world every year since 2006. We receive even more investment in stocks, bonds, and Treasury securities. Trump, Congress, and governors across the United States have made attracting international investment a priority. Tax and regulatory reforms that would strengthen the United States and make us a better place to do business would likely increase international investment in our economy.
However, foreign investment has also attracted criticism. Trump advisor Peter Navarro calls it conquest by purchase, and former U.S. Trade Representative Robert Lightizer calls it debt. President Joe Biden recently blocked the purchase of United States Steel Corporation by Japan-based Nippon Steel Corporation for dubious “national security” reasons. His action was reportedly taken despite the Treasury Department’s recommendation that the transaction would not threaten U.S. security.
Would Bessent guard against politically based abuses of authority such as Biden’s action? More broadly, would he support policies to attract more investment in our economy?
2. How does international trade affect Americans?
Background: Nearly all economists believe that the costs of trade restrictions tend to outweigh the benefits. In 2018, National Taxpayers Union (NTU) released a letter from more than 1,100 economists warning that increased tariffs could raise the cost of targeted goods, reduce exports, and damage our international relations.
Bessent says that opening our markets has hollowed out our manufacturing base. What does he mean by this, since real U.S. manufacturing GDP in 2023 was the highest in U.S. history? He has written that previous trade policies have left “a trail of devastation through swathes of our country’s heartland.” Does this include states like Iowa, Kansas, South Dakota, and Oklahoma, whose agricultural producers depend on trade for their livelihoods? If so, how would he protect their interests as Treasury Secretary? Additionally, 59% of imports are either raw materials, intermediate goods, or capital goods used by American businesses. Would he support new taxes on these goods supplied by U.S. allies?
3. Does the President have the authority to impose taxes without a vote of Congress, and, if so, under what circumstances?
Background: Article I, Section 8 of the Constitution gives Congress the authority to lay import duties and regulate foreign commerce. Previous congresses have delegated the authority to regulate commerce to the president under certain limited circumstances. How much unilateral power does Bessent believe the president has, and how would he work with Congress to make sure its views are taken into account? Would he support legislation to allow Congress to vote before new taxes are imposed?
4. Is the trade deficit a security threat that can be remedied by new taxes on imports?
Background: Some of Trump’s advisors want Trump to declare that the trade deficit is a national emergency that justifies broad-based increases in import taxes under the International Emergency Economic Powers Act. The president’s authority to restrict commerce under this statute “may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” The trade deficit does not meet that criteria. For example, imports have exceeded exports for 48 years in a row. During this time, the U.S. economy has grown by 255% after adjusting for inflation. NTU recently explained that tariffs, not trade deficits, pose the greater threat to the United States.
In the past, Bessent has criticized Bidenomics based on its reliance on “the discredited economic philosophy of central planning.” The Finance Committee should take this opportunity to ascertain how he would reject the discredited philosophy of central planning with respect to trade and investment policy if confirmed.