A House Financial Services Committee hearing became chaotic and filled with personal attacks on Tuesday as Treasury Secretary Scott Bessent and ranking member Maxine Waters (D-Calif.) engaged in a heated dispute over the economic effects of President Trump’s tariff policies. The intense exchange, ostensibly focused on inflation and housing expenses, concluded with a tense confrontation where Waters repeatedly cut off the secretary, stating, “You don’t get to talk,” and questioning his decorum as he attempted to interrupt her questions.
The disagreement began with Waters questioning what she described as a convenient shift in his economic views on tariffs. Waters asked the secretary if he had authored a letter to hedge fund investors warning that “tariffs are inflationary.” Bessent responded with a brief “no.”
Bessent’s denial contradicted reports from at least a year ago, as highlighted by the *Wall Street Journal*, indicating that the Treasury secretary had expressed this exact sentiment in February 2024. Bessent wrote to his hedge fund’s investors, “Tariffs are inflationary and would strengthen the dollar. Hardly a good starting point for a U.S. industrial renaissance… The tariff gun will always be loaded and on the table but rarely discharged.”
Are tariffs an inflationary tax or not?
Undaunted, Waters referenced a *New York Times* article detailing Bessent’s testimony before a Senate committee the previous summer, where he allegedly stated, “There is no inflation; tariffs are not being passed on to consumers,” and dismissed critics as suffering from “tariff derangement syndrome.” Waters sought to clarify the secretary’s current position, directly asking if tariffs increase costs. Bessent countered, citing the San Francisco Federal Reserve and “150 years of data” to argue that “tariffs do not cause inflation.” His argument was based on historical research suggesting that tariffs represent a small portion of GDP and that major inflation periods were primarily caused by wars, oil shocks, or monetary policy, rather than trade barriers, thus minimizing the macroeconomic impact even when specific goods become more expensive.
The line of questioning intensified when Waters pointed out an inconsistency in the administration’s recent communications. She noted that Bessent had told Bloomberg News in November that the government planned to reduce tariffs on items like coffee and bananas to “bring the prices down very quickly.”
“Mr. Secretary, why was that announcement even necessary if tariffs aren’t inflationary?” Waters inquired, challenging the “Trump logic” that tariffs are solely paid by foreign countries. “A tariff on coffee or bananas shouldn’t raise the price of either for American consumers… But that isn’t reality. It did raise prices across the board.” Waters contended that imposing tariffs on goods not produced in the U.S. only serves to “punish the American consumer.”
The tension in the room escalated as the discussion turned to the housing crisis. Waters accused the Trump administration of worsening affordability issues by imposing tariffs on essential construction materials such as lumber, steel, and appliances. She asserted that these policies would lead to “half a million fewer homes built at a time when we need more homes built, not less.”
As Waters spoke, Bessent attempted to interject, mentioning that lumber was trading at a five-year low. However, lumber futures are not at a five-year low, currently priced at $589.50, compared to $469 in January 2023.
Bessent’s interruption prompted an immediate and sharp rebuke from the ranking member. “Reclaiming my time. You don’t get to talk,” Waters declared, refusing to cede the floor. As Bessent continued to speak over her, attempting to shift blame for the housing shortage to “massed immigration” and the “10 million immigrants” admitted into the country, Waters’ patience visibly waned.
“Can you maintain some level of dignity?” Waters snapped as the two spoke over each other.
The committee chair eventually intervened, stating that the “gentlewoman’s time has expired,” although Waters protested that the secretary had used up her time with his interruptions.
Generally, Waters’ questioning aligned with research indicating a significant pass-through of tariffs to import and retail prices, a notable contribution of Trump tariffs to overall inflation, and substantial cost impacts in sectors like residential construction, where input tariffs affected concentrated supply chains. Bessent’s response aligns with arguments that tariffs constitute a limited share of total consumption and therefore cannot account for the majority of the recent inflation surge, which is heavily service-driven.
Within the current research landscape, the preponderance of evidence supports the conclusion that Trump’s tariffs have had a modest but clear inflationary effect at both the goods and aggregate levels, even if they are not the primary cause of overall inflation. The hearing highlights this tension: Bessent is essentially arguing that “modest” equates to “irrelevant,” while Waters emphasizes that for families struggling with housing and grocery costs, the portion of inflation attributable to tariffs is both politically and materially significant.
For this story, Reuters journalists utilized generative AI as a research tool. An editor verified the accuracy of the information before publication.