Summary:
- Bessent signals tariffs could return to prior levels by July
- Treasury still sees strong US growth, potentially above 3–3.5%
- Policy stance framed as “de-risking,” not full China decoupling
- Tariff threat adds to global risks alongside ongoing Iran war
- Markets face rising stagflation and trade fragmentation concerns
US Treasury Secretary Scott Bessent signalled that tariffs could be reinstated to previous levels as early as July, introducing a fresh layer of uncertainty for global markets already grappling with the economic fallout from the Iran war.
Bessent maintained a relatively upbeat assessment of the domestic economy, arguing that underlying momentum remains strong and that US growth could still exceed 3% to 3.5% this year. However, the potential re-escalation of trade barriers points to a more complex macro backdrop, particularly as higher tariffs would likely amplify existing inflation pressures and weigh on global trade flows.
On China, Bessent downplayed risks tied to President Donald Trump’s upcoming visit to President Xi (Trump is scheduled to visit Beijing on May 14–15,), emphasising that the US is pursuing a strategy of “de-risking” rather than full economic decoupling. At the same time, he flagged concerns around China’s expanding global trade surplus, suggesting Washington may take a firmer stance to rebalance trade dynamics.
For markets, the timing is critical. The prospect of tariffs returning coincides with ongoing disruption in energy markets linked to tensions around the Strait of Hormuz, where supply risks have already driven volatility in oil prices and inflation expectations.
The combination of trade tightening and elevated energy costs raises the risk of a more stagflationary environment globally. While the US economy may currently appear resilient, the reintroduction of tariffs could undermine supply chains, increase input costs, and dampen cross-border demand at a time when global growth is already under pressure.
Taken together, Bessent’s comments reinforce a policy backdrop where geopolitical risk, trade friction, and inflation dynamics are increasingly intertwined, leaving markets sensitive to both tariff developments and the trajectory of the Iran conflict.
