The recent economic strategy unfolding under Trump’s second term reveals a calculated approach. Trump, with Scott Bessent now guiding the Treasury, faces a complex challenge. The goal is clear — lower rates to stimulate economic growth — but the path is unconventional.
Trump knows that directly pressuring the Fed to cut rates won’t work like it did in his first term. The market’s reaction has shifted. Lowering the Fed Funds Rate now risks driving mortgage rates and other long-term rates even higher. Instead, Trump and Bessent are focusing on reducing the ten-year treasury yield, a key benchmark for borrowing costs.
Their plan involves tariffs, spending cuts, and tax reductions. These steps are designed to weaken inflationary pressures and create conditions for lower rates. But this comes with risks. By cutting spending, thousands of government jobs may disappear, raising unemployment. Markets could also dip as businesses face trade disruptions and economic uncertainty.
Trump’s strategy is high-risk, but it’s rooted in a long-term vision. He’s not chasing a market crash, but he understands short-term pain may be unavoidable. The real objective is sustained economic growth, and Trump’s willingness to endure temporary setbacks reflects his broader strategy.
The timing of this effort is critical. In 2025, over $9.2 trillion in U.S. debt will mature or require refinancing. Lower rates would reduce borrowing costs significantly. A recession, while painful, could force rates lower, creating more favorable conditions for this refinancing.
Trump’s push for lower oil prices ties directly into this strategy. Lower energy costs could cool inflation further, aiding the effort to bring rates down. Trump has consistently stated he wants lower oil prices to combat inflation, showing his focus on consumer costs.
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