Treasury Secretary Scott Bessent delivered a remarkably important speech on June 23 at the Economic Club of New York. Yet neither Wall Street nor most of the economic profession seems to have paid it enough attention.
By laying out what until now seemed more like haphazard policy measures, Mr. Bessent put down a marker for how the United States plans to operate in a changing global economic system. In the process, he elevated both the scale and the scope of a systemic change that started in earnest during President Trump’s first term, was sustained by President Joe Biden and is accelerating today.
There are significant consequences for many economists, investors and traders, including the need to update what they have learned from textbooks and the past few decades. Mr. Bessent’s speech amplified the core message of a class on geoeconomics that I have been teaching at the Wharton School. The leaders of tomorrow — whether destined for the C-suite or public service, in America and beyond — must adapt to this new world. It’s one in which considerations of national security, domestic politics and geopolitics no longer play second fiddle to traditional business interests in determining corporate and economic outcomes. Those business interests are now being actively sidelined.
Whether you are a country, a company, a household or an investor, your well-being is increasingly dictated by a fundamentally different calculus.
The cementing of this economic regime change is based on Mr. Bessent’s unsparing diagnosis that, for decades, the United States was being played. America had essentially failed to recognize that economic security is integral to national security. Policymakers mistook historical comfort for enduring strength, operating under the naïve assumption that a growing roster of trading partners would engage with global markets fairly. Those days are over, he warned: “America welcomes its partners, and we are stronger because of them. But our partnership now carries expectations. And, in some instances, nonnegotiable obligations.”
During his first term, Mr. Trump weaponized tariffs in response to concerns that a trading system lacking reciprocity — with China, in particular — left the United States at a disadvantage. In his second term, his list of targets has expanded enormously. This move toward economic statecraft was amplified as the Covid pandemic exposed vulnerable supply-chain interdependencies and brittle networks for critical goods.
