WASHINGTON - U.S. Treasury Secretary Scott Bessent told lawmakers on Wednesday that he had been mistaken when, in January 2024, he and his Key Square investment firm informed partners that "tariffs are inflationary." The comment drew scrutiny at a House Financial Services Committee hearing, where members questioned the document and sought clarification.
Addressing the committee, Bessent said he wanted to correct the record. He read back his earlier language and acknowledged the error, stating:
"If I was mistaken, I want to correct it. And I was also mistaken when I said the tariffs could be inflationary."
During his testimony, Bessent described the current U.S. economic picture as one of continued growth and easing inflationary pressure despite a number of tariffs that had been put in place by President Donald Trump since taking office a year ago. He summarized that dynamic with a metaphor intended to convey an absence of the anticipated inflationary impact:
"So tariff inflation was the dog that didn’t bark,"
Committee members also had before them U.S. economic data noted by Bessent. Officials pointed to a larger-than-expected rise in the Producer Price Index in December, a report released last month, which market observers say could indicate inflation might accelerate in the months ahead. Bessent referenced that data in the context of his correction, noting that while the PPI uptick is notable, the broader trend he cited remains one of growth alongside moderating inflation.
The exchange unfolded against the backdrop of questions about how tariffs, fiscal policy and other forces intersect with price trends. In clarifying his earlier remarks, Bessent limited his statements to the facts before the committee and did not advance additional conclusions beyond the correction and the economic indicators discussed.
Summary
At a House Financial Services Committee hearing, Treasury Secretary Scott Bessent said he was wrong to tell partners in January 2024 that "tariffs are inflationary." He corrected the record, described the U.S. economy as growing with inflation coming down despite tariffs imposed by President Trump since taking office a year ago, and noted a recent rise in the Producer Price Index that could presage higher inflation in coming months.
Key points
- Secretary Bessent acknowledged an error in a January 2024 communication with Key Square partners that stated "tariffs are inflationary."
- Bessent told the House Financial Services Committee the U.S. economy is growing and inflation is easing, even after a series of tariffs imposed since President Trump took office a year ago - a dynamic he described as "the dog that didn’t bark."
- U.S. data released last month showed a larger-than-expected rise in the Producer Price Index in December, which could signal upward pressure on inflation in the months ahead; this data point informs near-term market and sector considerations, particularly for producer-focused industries such as manufacturing and wholesale trade.
Risks and uncertainties
- Near-term inflation dynamics remain uncertain - the December rise in the Producer Price Index could indicate inflation picking up in coming months, posing upside risk to price pressures affecting producers and manufacturers.
- Policy and political developments tied to tariffs are an ongoing uncertainty - although Bessent said tariffs had not produced the inflationary effect he had earlier suggested, future tariff actions or other trade measures could alter price trajectories for sectors exposed to imported inputs.
Tags: trade, inflation, tariffs, economy