Economy

In a CNBC interview, Treasury Secretary Scott Bessent suggested for a review of the Federal Reserve that would go beyond the current controversy over building renovations and look at its overall function.
The comments come amid an intensifying conflict between the White House and the central bank.
Bessent backed the idea that the Fed probably should be easing with inflation mostly moderating.

Treasury Secretary Scott Bessent on Monday suggested a review of the Federal Reserve that would go beyond the current controversy over building renovations and look at its overall function.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said during an interview on CNBC’s “Squawk Box.” “Has the organization succeeded in its mission? If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why has this happened.”

The comments come amid an intensifying conflict between the White House and the central bank.
Last week saw conflicting reports over whether President Donald Trump was preparing to fire Fed Chair Jerome Powell. Reports from the White House indicated a move was forthcoming, but Trump soon after denied he is readying what would be a legally questionable maneuver.
Bessent has been at the center of the controversy, both as a potential successor at the Fed as well as reports pointing to the Treasury chief as a mediator looking to discourage Trump from ousting Powell.
“President Trump solicits a whole range of opinions and then makes a decision,” Bessent said when asked about a Wall Street Journal report that he had helped convince Trump to stay his hand on Powell. “So he takes a lot of inputs, and at the end of the day it’s his decision.”
Trump has demanded the Fed dramatically lower its benchmark overnight borrowing rate, something that appears unlikely regardless of the chair.

In addition, the administration in recent days has criticized the Fed for cost overruns at the $2.5 billion renovation it has undertaken for two of its buildings in Washington. Administration officials reportedly are planning soon to view the project in person.
On the question of interest rates, Bessent backed the idea that the Fed probably should be easing with inflation mostly moderating.
“They were fear mongering over tariffs, and thus far we have seen very little if any inflation,” Bessent said. “We’ve had great inflation numbers. So, you know, I think this idea [is] of them not being able to break out of a certain mindset. All these PhDs over there, I don’t know what they do.”
The Fed last cut rates in December, which completed a brief easing cycle that brought the fed funds rate down a full percentage point. However, as the Fed eased both mortgage rates and Treasury yields moved higher.
Market pricing indicates the Fed probably will cut again in September. More

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The U.K. finds itself in something of a sweet spot when it comes to trade, given it has deals with both the U.S. and European Union.
That’s a turnaround after the uncertainty that followed the 2016 Brexit referendum, which prompted businesses to shift operations to mainland Europe and exports to fall.
President Donald Trump’s threatened 30% tariffs on the EU might drive some businesses to reconsider the U.K.

A European Union (EU) flies alongside a British Union flag, also known as a Union Jack in London.
Jason Alden | Bloomberg Creative Photos | Getty Images

In 2016, the U.K.’s vote to leave the EU prompted many businesses to shift operations to the European continent, taking investment and headcount with them.
Fast forward to 2025, and the specter of U.S. President Donald Trump’s 30% trade tariffs on the EU, which will kick in on Aug.1 unless a trade deal is reached, could bring them back.

“The U.K. could be a big indirect winner” if the threatened U.S. duties on the EU become a reality, according to Alex Altmann, partner and head of the German desk at London-based accountancy and business advisory firm Lubbock Fine.
“If the tariff rate for the EU finally ends up anywhere near this 30% level then the U.K.’s much lower U.S. tariffs would offer a major incentive for EU companies to shift some of their manufacturing to the U.K. or to expand their existing U.K. facilities,” he noted in emailed comments. 

A Range Rover Sport SUV on the production line at car manufacturing plant in Solihull, U.K.
Chris Ratcliffe | Bloomberg | Getty Images

“The U.K. has a lot of spare manufacturing capacity after Brexit. A big gap between U.K. and EU tariffs would be a major opportunity for the U.K. to regain some of its lost status as a key European manufacturing hub,” added Altmann, who is also the vice president of the British Chamber of Commerce in Germany.
As things stand, the U.K. has already struck a trade deal with the U.S. that reduces duties on cars to 10% and grants it the lowest duty on steel imports. London also has a “reset” deal with the EU, after the Labour government under Prime Minister Keir Starmer — who was opposed to Brexit — carved out a trade agreement following years of post-referendum acrimony.

The post-Brexit trade landscape

The sweet spot the U.K. now finds itself in comes after several years of uncertainty and angst for businesses, as they’ve tried to navigate a post-Brexit world of more red tape and barriers to export.

That’s been an ongoing gripe for exporters, given that the 27-country EU remained the U.K.’s largest trading partner after Brexit was finally enacted in 2020. The EU accounted for more than 50% of Britain’s foreign trade in goods in 2024, according to the European Commission.

A number of big businesses, and particularly financial services firms such as Goldman Sachs and JPMorgan, sought to avoid the transnational regulatory complexities of the post-Brexit landscape by relocating operations and assets to other financial hubs in the EU, such as Dublin, Paris, Amsterdam and Frankfurt. The exodus was ultimately not as dramatic as was initially feared.

Supporters and critics argue over the merits and disadvantages of Brexit and the divorce from the EU’s single market and customs union, as well as the free movement of goods and people that came with EU membership. Yet most economists agree that Brexit dented U.K. exports, jobs and economic growth.
The Office for Budget Responsibility, the U.K.’s independent forecaster, estimates that exports and imports will be around 15% lower in the long run, compared to if the U.K. had remained in the EU.
Although economists argue over the impact on the wider economy, it’s generally agreed that the U.K.’s GDP is around 5% lower than it would have been, had Britain not voted to leave the bloc.

Tariffs windfall? Not so fast

While the U.K. is reveling in its newfound harmony with its American and European business partners, the extent of any windfall that comes as a result of the EU’s trading pain with the U.S. remains to be seen.
It remains unclear whether Trump’s planned 30% tariff on the bloc will actually go ahead on Aug.1. The U.S. president’s mercurial nature means the ultimate levy rate could go higher — he previously threatened a 50% tariff — or lower, toward the baseline 10% level that the EU is pursuing.
Not everyone agrees that the U.K. could benefit from trade misfortunes that befall the EU, whatever the outcome of last-ditch talks between Brussels and Washington.
“First of all, the 30% tariffs for the EU, they’re not a given,” Carsten Nickel, managing director at Teneo, told CNBC last week, pointing out that any potential post-tariffs shift in business investment from Europe back to the U.K. would be unlikely to happen quickly.

President Donald Trump attends a bilateral meeting with European Commission President Ursula von der Leyen during the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 21, 2020.
Jonathan Ernst | Reuters

“If we were to talk about moving production facilities from Europe to the U.K. because the U.K. has a deal with the U.S. — the time horizon for that is a multi-year, if not decade-long, kind of time horizon,” he said.
In addition, Nickel noted that the U.K.’s strength remained in financial services rather than in manufacturing, which remains more prevalent in export-oriented countries like Germany and Italy.
“The reality is that the U.K.’s comparative advantage is not in high-end manufacturing … so the idea that you’re going with this stuff that you’re currently producing in, say, Germany and Switzerland, and you’re moving that to the U.K. tomorrow … it’s just not a decision that that a business leader in Europe can take just like that,” Nickel said. More

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