• US Treasury Secretary Scott Bessent disputes the Federal Reserve’s assessment of tariff impacts, calling it "a bit off."
  • Upcoming US-China trade talks in Stockholm could determine whether a tariff truce is extended beyond August 12.
  • Analysts warn tariffs may push core inflation above 3%, testing the Fed’s 2% target amid market calm.

Bessent Takes Aim at Fed’s Tariff Outlook

US Treasury Secretary Scott Bessent has openly criticized the Federal Reserve’s analysis of new tariffs, suggesting its downplaying of long-term inflationary risks misses the mark. "The Fed’s view is a bit off," Bessent said, as tensions over trade policy intensify ahead of critical negotiations with China next week in Stockholm. The talks, aimed at extending a tariff truce set to expire August 12, come amid broader concerns that retaliatory measures could escalate costs for businesses and consumers.

While Fed officials have framed tariff-driven inflation as a temporary "one-off," private analysts—including those at Goldman Sachs—expect core inflation to breach 3% in the coming months. Bessent has repeatedly cautioned that the US’s sweeping 10% baseline tariff, with higher rates for strategic goods like semiconductors and autos, risks triggering a cycle of retaliation. "The full impact isn’t priced in yet," one Treasury official noted, speaking on condition of anonymity.

Market Calm Faces August Test

Financial markets have so far shrugged off the looming deadline, betting that talks will avert an immediate breakdown. But behind the scenes, manufacturers reliant on imported inputs are bracing for disruption. Auto and electronics sectors are particularly exposed, with some firms already factoring in higher costs. "If the truce lapses, we’re looking at a supply chain reckoning," said a lobbyist for a major industry group.

Bessent, who will lead the US delegation in Sweden, has signaled optimism about extending the current pause. Yet fundamental disagreements persist over the scope of future tariffs, and China’s response remains uncertain. The Stockholm meeting marks the third round of talks, underscoring the high stakes for both economies. Meanwhile, job cuts and capital outflow risks loom as potential secondary effects, compounding pressure on policymakers.

Inflation vs. Negotiation Leverage

The Treasury’s warnings contrast with the Fed’s measured stance, highlighting a rift in how Washington views the trade-offs. "This isn’t just about inflation—it’s about securing long-term leverage," a source close to the negotiations said. While the Fed focuses on smoothing volatility, Bessent’s team appears willing to tolerate short-term pain for strategic gains. For now, investors seem to agree that the August deadline isn’t a cliff edge—but as one trader put it, "The clock is ticking louder."