According to a report by the UK Financial Times citing four insiders, Treasury Secretary Scott Bessent of the Trump administration is pushing for new universal tariffs on U.S. imports starting at 2.5% and increasing by 2% monthly.

Insiders say that the 2.5% starting tariff rate will be adjusted monthly by the same margin, allowing businesses time to adjust and giving countries a chance to negotiate with the Trump administration.

Universal tariffs could potentially be raised to as high as 20%—consistent with Trump’s extreme positions during last year’s campaign. However, this gradual approach is much more moderate than the immediate action some countries are concerned about.

As Bessent proposed this, Trump’s team is debating how to implement the tariff plan. The U.S. president also escalated his tariff rhetoric in a speech in Florida on Monday, threatening to impose more tariffs on semiconductors, metals, and pharmaceuticals.

"We must bring manufacturing back to our country," Trump said.

Trump made these comments after a tumultuous day in U.S. stock markets on Monday, primarily triggered by a sell-off in tech stocks, as China seems to be leading the global AI race over the U.S.

Given the impact on technology companies reliant on overseas chip manufacturers, Trump’s threat to impose tariffs on semiconductors entering the U.S. will be difficult to implement.

In contrast, Bessent’s plan would only raise tariffs by 2.5% each month. Two people familiar with the discussions said it remains unclear whether the Treasury Secretary has persuaded other major stakeholders, including Trump’s nominated Commerce Secretary Howard Lutnick, to adopt his proposed gradual tariff imposition.

A person familiar with Bessent’s thinking refused to comment on the record regarding this proposal but stated, "He hasn’t developed any plans yet, but if confirmed, he looks forward to being part of the dialogue."

On Monday evening local time, the Senate easily confirmed Bessent as the next U.S. Treasury Secretary with a vote of 68 to 29. Just hours later, Trump told reporters aboard Air Force One that he hopes to impose tariffs much “higher than 2.5%.”

Tariff policy is at the center of a heated trade debate between hawks like Peter Navarro and Jamieson Greer and moderates like Bessent.

Trump threatened to impose tariffs of up to 25% on goods imported from Canada and Mexico as early as this weekend, and in recent days threatened to impose 25% tariffs on Colombia due to the immigration dispute.

Another person familiar with Trump's thinking said he is weighing different options. "The president is not yet ready to decide on any one plan."

While Bessent and others who support low starting tariffs believe raising tariffs gradually will give countries and businesses time to adjust and negotiate, critics argue that higher starting tariffs will send a clearer message.

Trump made high tariffs a core part of his "America First" campaign rhetoric last year and vowed in September to impose "tax rates they are not used to" on foreigners.

Since taking office on January 20, Trump’s main initiative has been to issue a memorandum outlining investigations into U.S. trade policy, the reasons for the country’s trade deficit, and whether competitors manipulate currencies and unfairly tax U.S. businesses.

Last week, when a reporter asked him if he intended to introduce universal tariffs, Trump replied: "We might. But we are not ready for that yet."

Trade analysts and lawyers say Trump could quickly impose universal tariffs by leveraging executive powers like the International Emergency Economic Powers Act (IEEPA), which allows the president to respond to emergencies through economic means.

However, trade experts have also warned that utilizing the IEEPA to impose broad tariffs may face legal challenges from business groups.

Long a critic of the U.S. trade deficit, Trump stated that tariffs would be a way to increase U.S. revenue.

"We will not tax our citizens to make other countries rich, but rather impose tariffs and taxes on foreigners to make our citizens rich," he said in his inauguration speech.

At last week’s U.S. Senate confirmation hearing, Bessent stated that the Trump administration would use tariffs to address unfair trade practices, increase government revenue, and reach agreements with foreign countries.

Trump and his Treasury Secretary's comments raised concerns that the brief respite provided by tariff negotiations for the markets had ended, after which the dollar strengthened against all major currencies, and the dollar index approached 108 again.

"Bessent is fully discussing universal tariffs, albeit gradually, but they could rise to 20%—this is a big deal," said Rodrigo Catril, a strategist at National Australia Bank. "Trump has a protectionist agenda that is detrimental to global growth and supports the dollar as a prominent safe haven."

However, there are signs that the bullish momentum for the dollar may be quietly weakening. According to Bloomberg's analysis of Commodity Futures Trading Commission (CFTC) data, speculators withdrew from their most bullish dollar positions since 2019 in the week ending January 21.

However, in recent months, selling the dollar has proven to be a painful trade, as the dollar typically benefits from tariff expectations, rising more than 7% in the last quarter of 2024.

Bloomberg strategist Garfield Reynolds noted that concerns about universal tariffs on the U.S. have reignited unease in the currency markets. In a rapidly changing environment, investors face two key certainties—dollar strength and volatility, which are two reinforcing factors.

Trump and Bessent's latest remarks clearly remind traders that the calm moments in the currency market may be short-lived, as the specter of tariffs—and the changing bets on their impact—continue to exacerbate the volatility in the $75 trillion currency market.

OCBC strategist Christopher Wong stated, "Concerns over tariffs eased last week but have now intensified again, driving the dollar stronger. This indicates how unstable the situation is, and the uncertainty surrounding timing, scale, and scope should continue to drive two-way trading, especially after some dollar long positions were cleared last week."

Article reposted from: Jinshi Data