On the evening of the 18th Beijing time, US Treasury Secretary Scott Bessent responded to Moody's downgrade of the US credit rating by stating that he does not trust Moody's and that their ratings "lag behind the indicators." Bessent mentioned that the growth rate of the US GDP will exceed that of the debt.
Regarding tariffs, Bessent stated that many regional agreements will be reached. He mentioned that the US is focusing its tariff discussions on 18 key trading partners. Bessent also confirmed that he did indeed have conversations with Walmart CEO Doug McMillon on Saturday, and that Walmart will shoulder some of the tariffs.
As for the Federal Reserve's position, Bessent noted: "The Federal Reserve has not asserted that tariffs will lead to inflation; they simply said they are uncertain and are currently in a wait-and-see mode."
It is worth noting that recently, with the easing of trade tensions, US stocks have continued to rebound, although some Wall Street analysts have warned that the rebound may be excessive. So far, a trade framework has yet to be agreed upon. Without a concrete trade solution, market volatility may reoccur.
US Treasury Secretary speaks out.
Recently, the news that the international credit rating agency Moody's downgraded the US sovereign credit rating from Aaa to Aa1 has attracted widespread attention internationally. The main reason for Moody's downgrade is the increase in the ratio of US government debt and interest payments, which casts a shadow over the USA's position as the world's highest-credit sovereign borrower. The timing of Moody's announcement was after the US stock market closed, limiting the market's reaction time, but how the American Financial market reacts on the 19th will be full of uncertainty for investors.
On May 18 local time, US Treasury Secretary Bessent stated in an interview with NBC's "Meet the Press" that he does not trust Moody's and that their ratings "lag behind the indicators."
Bessent claimed that the downgrade is related to the spending policy of the Biden administration, which has touted such spending as investments in priorities, including addressing climate change and increasing Medical coverage. "We did not end up in this situation in the past 100 days." Bessent stated that this was the result of the spending inherited by the Biden administration and the past four years, "We are determined to cut spending and promote economic growth."
Besant also revealed that he had a phone call on Saturday with Walmart CEO Doug McMillon to discuss the latest developments regarding the world's largest retailer's plans to raise prices due to increased import taxes. U.S. President Trump stated on the 17th that Walmart should stop blaming price increases on tariffs and should 'absorb the tariff costs.' Walmart responded that the company 'has been working to keep prices as low as possible, and we will not stop.'
In fact, Walmart will, as you said, absorb some of the tariff costs, just as they did in 2018, 2019, and 2020,' Besant said, adding that overall, service inflation is declining and inflation is falling for the first time in four years.
Besant emphasized that he did not pressure Walmart, saying, 'Doug and I have a good relationship, so I just wanted to hear him directly rather than through second-hand or third-hand messages from the media. These all come from their earnings reports conference calls, and during earnings calls, companies must provide the worst assumptions.'
Regarding the Federal Reserve's stance, Besant stated, 'The Fed does not assert that tariffs will lead to inflation; they just say they are uncertain and are currently in a wait-and-see mode.'
On tariff negotiations, Besant indicated that many regional agreements would be reached. He noted that the USA is focusing tariff discussions on 18 key trading partners. He stated that countries that do not negotiate sincerely will receive tariff letters, with rates at the level of April 2.
Besant said, 'Back to the question of Moody's downgrade, who cares? Qatar does not care, Saudi Arabia does not care, the UAE does not care. They are all increasing their investments in the USA and are drafting a ten-year investment plan.'
When asked about sanctions on Russia, Besant declined to predict the next steps. 'We will wait and see the progress after both sides sit down at the negotiating table. Trump has made it clear that if Putin is not sincere about negotiations, the USA will not hesitate to intensify sanctions on Russia alongside its European allies.'
Warnings from Wall Street.
Recently, with the easing of international trade tensions, the US stock market has continued to rebound, and the Standard & Poor's 500 Index has surged nearly 1,000 points from its low on April 9.
However, some Wall Street Institutions have warned that despite the trade breakthrough, one should not chase the rebound of the US stock market. Jeffrey Kleintop, Chief Global Investment Strategist at Charles Schwab, said: "I am concerned about the magnitude of the rebound we are seeing." He added: "The market may be a bit overly enthusiastic, thinking that trade concerns are over. So far, a trade framework is far from being agreed upon."
Optimism in the US stock market has also been buoyed by a series of investment announcements made during Trump's recent visit to the Middle East, indicating that the US government is open to negotiating deals in the region. However, strategists warn that without a concrete trade solution, market volatility may reappear.
Jay Pelosky, founder of TPW Consulting, stated: "The tariff cat is out of the bag." He added that this marks a broader "erosion of trust and confidence" in the US government and its policies. "This trust has been seriously damaged," he added. Jay Pelosky said: "Even if some tariffs are reduced, we still see the highest levels of tariffs in the USA since World War II or earlier, which will negatively impact the economy."
UBS Group strategists stated in a report that despite recent negotiations, tariff levels remain "significantly higher" than at the beginning of the year. They estimate that the effective tariff rate in the USA—average tariffs on all imported goods—is currently about 15%, five times higher than the 2.5% before Trump returned to the White House in January.
Solita Marcelli, Chief Investment Officer of UBS Group Wealth Management in the Americas, stated: "As the Trump administration signals that a 10% base tariff is unlikely to be lowered through negotiations, these increased tariffs may slow down the US economy and drive up prices." Although more trade agreements may be announced in the coming weeks, Marcelli warned that "ongoing uncertainty may trigger further market volatility."
In a recent interview with France's Sunday Forum, European Central Bank President Lagarde stated that the recent strengthening of the euro against the dollar is caused by the USA's erratic policies, which presents an opportunity for Europe.
Lagarde pointed out that during a time of uncertainty, the dollar usually strengthens significantly. However, the opposite is currently happening, with the euro strengthening against the dollar. This seems counterintuitive, and the underlying reason lies in increased uncertainty and some financial markets losing confidence in US policies.
She stated that after the new government in the USA took office, the situation in the economic, political, and defense sectors, which are regarded as the three pillars of international cooperation, changed immediately. This is less about a threat and more about an opportunity. European leaders must seize this opportunity to accelerate the deepening of EU cooperation.
Lagarde said: "We see that the rule of law, courts, and trade rules in the USA are being challenged, and uncertainty continues to exist. Europe, on the other hand, is viewed as a stable economic and political region, with a robust currency and an independent central bank." She added that if the EU and USA tariff negotiations fail, the EU needs to have strong countermeasures. The European Commission is also seeking consensus with other countries, which is crucial.
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