New U.S. Treasury Chief to Shake Up Markets

Wall Street's initial assessment of Treasury Secretary nominee Scott Benset has been positive, but now the "tough challenges" are about to begin...

The early evaluations of Wall Street regarding Treasury Secretary nominee Scott Benset have emerged—and they are optimistic. However, the challenging part now commences.

In the months ahead, Benset will face immense challenges as he seeks to soothe the markets while promoting unconventional plans.

It was abruptly announced Monday evening that on his first day in office, he would impose a 25% tariff on "all products" from Mexico and Canada, along with a new 10% tariff on China.

If these measures are implemented after he takes office, they could disrupt importers hoping for gradual tariff implementations, while Benset’s recent comments on tariffs and the Federal Reserve may further complicate his task.

Nonetheless, buoyed by optimism for this "investor favorite" for Treasury Secretary, the Dow Jones Industrial Average rose by more than 400 points on Monday.

This optimism partly stems from the choice of a familiar figure with a long-term investment track record in the macroeconomic arena as his chief economic officer, rather than opting for more unconventional candidates like Lutnik.

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Ian Bremmer, president of Eurasia Group, remarked in a report on Monday morning, "The economic team is more pragmatic, especially Benset."

Here are some reasons why his honeymoon period with Wall Street may be drawing to an end or proving to be fleeting:

The Thorny Tariff Issue

The first challenging issue will be tariffs.

Earlier this month, Benset publicly expressed his fondness for tariff plans through a commentary while in the running for this position. Nevertheless, he also issued cautious warnings to reassure wary businesses, contrasting his often-expressed desire for comprehensive tariffs.

He wrote, "Strategically using tariffs can increase Treasury revenue, encourage businesses to restore production, and lessen our dependence on industrial products from strategic competitors," repeatedly emphasizing the need to focus on "strategically important industries."

Benset's critics have been circulating another of his comments from recent days, in which he described himself as "essentially a free trader," stating that his goal is "to save international trade, not to return to the tariffs of the turn of the century."

To put it mildly, this is likely to incite a debate within the administration.

Jason Furman, a professor at Harvard University and former chair of the Obama Economic Advisory Council, stated on Monday, "The greater issue is that the main decisions about the economy will be made. There's been no indication that he has abandoned large-scale, comprehensive tariffs, I would feel nervous before hearing that."

Leftist Opposition—Especially Regarding the Federal Reserve

Another comment from Benset's past that might become a focal point is his suggestion regarding a "shadow" Federal Reserve chair.

He proposed this idea in an interview in October, suggesting that the current Federal Reserve chair, Powell, could become a "lame duck" well before his term ends.

Powell's complete term as a Federal Reserve Board member concludes in 2028, but his tenure as chair will end sooner, in 2026.

At that time, Benset argued that if a successor were appointed in advance, "based on the concept of forward guidance, no one would really care about what Powell has to say next."

Reports suggest that Benset has privately abandoned this idea, but on Monday, Senator Elizabeth Warren stated that the Federal Reserve could be a key factor in opposing a potentially progressive selection.

In her statement, she wrote, "Government interference in the independence of the Federal Reserve would be a serious mistake."

As a current member of the Senate Finance Committee, Warren is likely to meet with Benset multiple times in the coming years, as she is poised to ascend to the Senate Banking Committee's top position in 2025. This remains an issue that markets will closely monitor.

Ed Mill, a Washington policy analyst at Raymond James, noted in a report on Monday, "Any action challenging the independence of the Federal Reserve is always a concern in client conversations."

Right-Wing Discontent with the "Status Quo" Candidate

Benset may also face discontent from the right.

Emerging as the choice amidst a brutal selection process, some of his closest allies have publicly opposed him. Musk, in particular, referred to Benset as "a status quo choice," with no hint of praise in his tone.

Greg Valliere, chief U.S. policy strategist at AGF Investments, stated in a report on Monday that Benset will be "one of the centrist members of the cabinet, receiving bipartisan support."

In fact, questions regarding him have circulated among right-wing Republicans since Benset emerged as a frontrunner for the position weeks ago. Much of this concern stems from his previous experience as head of investments at Soros Fund Management, with Soros being the number one "boogeyman" in right-wing circles.

Benset left Soros Fund Management in 2015 and co-founded his own investment firm, Key Square Group.

Can He Deliver on Tax Cuts?

Another pressure point for Benset is to fulfill his campaign promises regarding a comprehensive extension of his 2017 tax cuts, along with a dazzling array of additional tax reductions.

Benset is likely to be tasked with ensuring that these tax cuts are realized. He emphasized that these measures were a top priority in an interview with The Wall Street Journal last weekend.

However, the road ahead is far from certain. The federal corporate tax rate could draw particular market scrutiny and is politically contentious.

The promise is to reduce the current 21% tax rate to 15%. But some within his own party have indicated that this rate might remain unchanged—or, if they could cover other priorities, they might even accept raising the rate to 25%.

For Benset, the larger challenge of turning these tax cut bills into law could be the staggering $36 trillion national debt, along with questions about whether any new costly tax cuts are feasible.

Chris Whalen, chairman of Whalen Global Advisors, spoke candidly about the fiscal challenges ahead. He stated:

"There might be no opportunity to do what he wants to do. As the debt becomes so large, your options diminish."