Watch CNBC's full interview with National Economic Council Director Kevin Hassett

Key Concepts

90-day pause on tariffs (excluding China)
Trade negotiations and reciprocity
Bond market influence on trade policy
Phases of negotiation: Truce and Deal Delivery
Tariff revenue and budget deficit reduction
Permanent baseline tariff of 10%
Leverage for trade negotiations
Trade deficit as a national emergency

Trade Policy and Tariff Pause

The discussion centers around President Trump's announcement of a 90-day pause on tariffs, excluding China. Kevin Hassett clarifies that the decision wasn't a result of internal division but a unified team effort, with Secretary Rutnik present during the final decision. The pause aims to create enough pressure on trading partners to bring them to the negotiation table and address long-standing issues.

Negotiation Signals and Progress

Hassett emphasizes that negotiation signals were already present before the official announcement. He mentions that the President has established a system to prioritize allies and other countries for trade negotiations. He claims that there are nearly 20 countries with sensible offers on the table, indicating significant progress in trade negotiations. Two deals were almost closed as of the previous week.

Bond Market Influence

The bond market's anxiety and movements in the 48 hours leading up to the pause are acknowledged as a contributing factor to the decision, but not the sole driver. Hassett asserts that a systematic plan was already in motion, and the bond market's signals merely added urgency.

Negotiation Phases and Market Reassurance

Hassett outlines two phases of negotiation:

Truce: Establishing a process for orderly negotiations with timelines and priorities, guided by Suzy Riles, the Chief of Staff's office. A meeting with senior cabinet officials is scheduled to discuss this process.
Deal Delivery: Demonstrating tangible results and delivering deals that benefit American workers.

He believes that showcasing a clear schedule and priorities will reassure the market.

Tariff Revenue and Budget Implications

The discussion touches upon the impact of tariff revenue on the budget deficit. Hassett explains that the Congressional Budget Office (CBO) will likely incorporate the $2 billion per day in tariff revenue into its baseline, which will reduce the deficit. However, this won't be considered a tax increase and won't affect the overall budget numbers agreed upon.

China and Trade Deficit

Regarding China, Hassett acknowledges President Trump's strong relationship with President Xi and suggests that future conversations are likely. He argues that the significant trade deficit gives the United States leverage in negotiations with China. He describes the current situation as an "extreme disruption" for the Chinese economy, with containers sitting in port and factories uncertain about future shipments.

Tax Policy and Timeline

The ambitious timeline for tax policy remains unchanged. The "Big Six" group is meeting weekly to negotiate tough issues, aiming for the House and Senate to move forward in a coordinated manner. Hassett expresses optimism that the "big beautiful tax bill" is on schedule and can be completed before the August recess.

Permanent Tariff Baseline

Hassett states that the expectation is for a 10% baseline tariff to remain in place, requiring an "extraordinary deal" for the President to go below that level.

Art of the Deal vs. Deliberate Policy

Hassett refutes the notion that the trade policy is solely based on impulsive decisions. He asserts that the policy was discussed extensively with trade advisors over many weeks. The President considered multiple options to create leverage for negotiations. The decision to implement a pause was studied from the beginning as a way to transition from signaling seriousness to achieving negotiations and deals.

Addressing the Trade Deficit

The original plan involved tariffs as a function of the trade deficit, which resulted in high numbers. Hassett suggests that these higher numbers helped convey the urgency of the situation and encouraged parties to come to the negotiation table.