The Trump administration expects U.S. growth to bounce right back in the coming 12 months after a first-quarter contraction, as the benefits of its economic agenda takes root.
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.
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”.
One key aspect of the bill that can accelerate growth is the ability of domestic manufactures 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.”
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.”
“He was very responsive. I think that the new chancellor, 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.
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 makes little sense.
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.
