• During his first term, Trump threatened tariffs while renegotiating trade with Mexico and Canada.
• Now, his promise to slap a 25% tariff on all imports from the countries strikes a similar chord.
• Scott Bessent, Trump's pick for treasury secretary, has called tariffs a "negotiating tool."

President-elect Donald Trump helped pen business advice in his 1987 book "The Art of the Deal" that's been reflected in his posture on tariffs, from his first term to today: "Leverage: don't make deals without it."

Trump announced on Monday that he planned to use an executive order on his first day in office to impose a 25% tariff on all goods from Mexico and Canada. He said in a post on Truth Social that the tariffs "will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!"

While Trump promised to implement harsh tariffs throughout the campaign, actions from his first term suggest that the sweeping threat — which has reverberated throughout global markets and vulnerable sectors like the auto industry — might be a version of his long-favored "leverage."

In June 2019, Trump threatened tariffs against Mexico if the country didn't alter its immigration system, which it eventually did.

"That was in a sense analogous to what he's doing now outside of economics when he's talking about fentanyl and he's demanding more control of people coming to the border," Robert Lawrence, a professor of international trade and investment and a senior fellow at the Peterson Institute for International Economics, told Business Insider. "Were the tariffs the reason the Mexicans became more compliant? I don't know, but he certainly did use that as a threat."

Lawrence said that the threat of tariffs is effective rhetorically right now, particularly for those in the European Union who doubted Trump's willingness to follow through on his word.

Trump also used tariffs as "leverage" when renegotiating the North American Free Trade Agreement, Mark Blyth, a political economist at Brown University, told BI.

Blyth said that Trump is notably unpredictable, and until he steps into the White House again on January 20, people can only speculate about what promises he'll follow through on.

"We're all shadowboxing. We're jumping at the show: 'Look, he's going to do this! He says he's going to do this!'" Blyth said. "He's still got to get in, he's still got to form his Cabinet. He's got to put in these people and then he can do stuff."

A Brookings Institute report said tariffs set important context for the NAFTA renegotiations, and Mexico and Canada likely wouldn't have come to the negotiating table without them. However, the report concluded that using tariffs as leverage does not necessarily result in significantly more favorable trade relations, though they do succeed in getting "other countries' attention."

While financial analysts are taking Trump's threats seriously, some banking leaders seem to think that Trump's most recent tariff threat is a continuation of his past negotiation tactics.

"This is President Trump's negotiating style: step one, punch in the face, step two, let's negotiate," Kieran Calder, the head of equity research for Asia at Union Bancaire Privée, said, per Bloomberg.

In a report published Tuesday morning, UBS said that "the timing and narrow focus of the latest threat suggest scope for negotiation." By focusing on non-trade issues — immigration and drugs — Trump is suggesting that the tariffs are transactional, focused more on gaining the upper hand than implementing long-term tariffs, the authors argue.

Luis Costa, the global head of emerging markets strategy at Citi Bank, made a similar point on Squawk Box Europe Tuesday. "To us, it is absolutely obvious that the Trump administration will use tariffs as one important lever to negotiate with Sheinbaum's government," he said, referring to Mexico's president, Claudia Sheinbaum. "It is probably something that is more about negotiation rather than about imposing tariffs."

And Trump's own nominee for treasury secretary, Scott Bessent, published an opinion piece earlier this month arguing that the president-elect uses "tariffs as a negotiating tool with our trading partners."

A spokesperson from the Trump transition team told BI in a statement that "in his first term, President Trump instituted tariffs against China that created jobs, spurred investment, and resulted in no inflation."

• A 2017 presentation for macro investor Scott Bessent's hedge fund explains his research process and "edge."
• Bessent, the nominee for Treasury secretary by President-elect Donald Trump, said his "guiding research principle is change."
• His firm, Key Square Capital, struggled to generate returns despite its strong pedigree.

As Scott Bessent's political profile rose, so did the chatter around his macro hedge fund's relatively poor returns.

Bessent — the former righthand man for billionaire George Soros and now the nominee for Treasury secretary by President-elect Donald Trump — saw billions of dollars leave his firm, Key Square Capital, after its 2016 launch, Reuters reported. The manager lost money in 2017, 2018, 2020, and 2021 before notching double-digit gains in the last three years. This year's gains were helped by a bet on Trump's reelection.

In macro investing though, performance can be choppy, and Bessent's investing process is a throwback to old-school macro traders like his former boss, according to a 2017 Key Square presentation reviewed by Business Insider.

It's not clear if there have been any changes to the investment process in the seven years since the presentation was created. Bessent worked for Soros for 15 years and, before that, was the first-ever analyst for legendary short-seller Jim Chanos' Kynikos Associates.

The presentation details how Bessent might go about crafting his views on fiscal policy in his new role, should he be confirmed by the Senate following Trump's inauguration.

"Key Square views its research process as a think tank that is bolted on to disciplined trading and risk management," one slide reads. The manager describes the team as "aggressive intellectuals" who "organize frequent teach-ins" and have a constant stream of outside experts coming to the office to speak to the team.

"Our guiding research principle is change," the presentation continues, stating that there isn't a "singular framework" for evaluating potential investments, but instead an evolving view that changes when new information is available.

The firm prides itself on finding that new information. The presentation claims that the Key Square team reads "voraciously," travels frequently, and taps the firm's "unparalleled global network of contacts consisting of policymakers, political advisors, industry leaders, corporate management teams, consultants, academics, and market participants."

Sell-side analysts, though, do not factor heavily into Key Square's process.

"We finish rather than start with the Street," the presentation states, tapping the research teams at big banks only to "understand consensus or seek alternative views."

The presentation also said that it considered the firm's patience and investment horizon a part of its "competitive edge."

"We are investors, not traders," the presentation reads. The typical investment is held for one to three years, and the firm is comfortable waiting to put money to work until the timing is right.

"We invest in the future, study the past, and focus on current pricing."

• Elon Musk has become one of Donald Trump's strongest political allies.
• Musk recently said his choice for the influential Treasury secretary role would be Howard Lutnick.
• Trump ultimately went with hedge fund manager Scott Bessent, however.

As President-elect Donald Trump assembles the key players to drive his new administration's agenda, Elon Musk is rarely far away.

From meetings at Mar-a-Lago in Florida to a weekend UFC match in New York, Musk has been a mainstay of Trump's political orbit in recent months. The Tesla CEO spent at least $119 million supporting the president-elect's 2024 campaign.

Musk is poised to be a high-profile player in Trump's second term. He's expected to serve as a co-lead of the forthcoming Department of Government Efficiency (DOGE) alongside onetime GOP presidential contender Vivek Ramaswamy.

There seems, however, at least for now, some limit to Musk's influence on Trump.

Trump tapped hedge fund manager Scott Bessent, the founder and chief executive of Key Square Group, to be his next Treasury secretary on Friday. Bessent, a Wall Street veteran and a top economic advisor to Trump, emerged as a favorite of the president-elect while on the campaign trail this year.

Last Saturday, however, before Trump decided, Musk shared his thoughts about the Treasury job, writing in a post on X that Cantor Fitzgerald CEO Howard Lutnick would be a stronger choice.

"My view fwiw is that Bessent is a business-as-usual choice, whereas @howardlutnick will actually enact change," Musk wrote at the time. "Business-as-usual is driving America bankrupt, so we need change one way or another."

Days later, Trump nominated Lutnick as commerce secretary. If confirmed by the Senate, the veteran businessman — who strongly supported the president-elect's campaign — is set to drive the administration's trade policy.

That Trump went his own way in selecting Bessent for what is seen as the top economic role in any presidential administration may be an early sign of the limitations of Musk's relationship with the president-elect.

The Wall Street Journal reported that Trump sought advice from Wall Street leaders for the Treasury spot, and his advisors told him that analysts would view Bessent as a stabilizing figure.

Bessent's economic worldview has largely mirrored Trump's. Shortly after the election, the hedge fund manager argued in an op-ed that the country's competitiveness "has been weakened by destructive energy policies and the channeling of investment toward a quixotic energy transition."

"Allowing the private sector rather than the government to allocate capital is crucial to growth," he wrote. "Overhauling the regulatory and supervisory environment will encourage more lending and reinvigorate banks."

It's the sort of message that Trump touted as he campaigned for a second term. And, in his announcement of Bessent's nomination, he continued in that same vein, remarking that Bessent will "help me usher in a new Golden Age for the United States."

Musk did not immediately respond to a request for comment from Business Insider.

• Trump nominated Scott Bessent, a billionaire investor, for Treasury secretary.
• Bessent spent years working for George Soros before founding a hedge fund.
• He's signaled support for many of Trump's proposals, including deregulation and tariffs.

President-elect Donald Trump nominated Scott Bessent, a Wall Street veteran and campaign ally, for Treasury secretary, one of the biggest Cabinet prizes.

Trump made the announcement Friday evening in a Truth Social post after multiple news organizations reported the plans. Trump's spokesperson did not immediately return Business Insider's request for comment.

"Scott is widely respected as one of the World's foremost International Investors and Geopolitical and Economic Strategists," Trump wrote on Truth Social, adding, "we will ensure that no Americans will be left behind in the next and Greatest Economic Boom, and Scott will lead that effort for me, and the Great People of the United States of America."

Bessent, 62, founded and runs the macro hedge fund Key Square Group and emerged as a key economic advisor to Trump on the campaign trail.

Bessent was a top choice for Trump early in the cabinet selection process. He widened his search, however, adding Kevin Warsh and billionaire investor Marc Rowan to the mix after growing frustrated by the "knife fight" jockeying between Bessent and Howard Lutnick over the position, The New York Times reported.

Elon Musk chimed in during that time, throwing his support behind Lutnick for Treasury secretary.

"My view fwiw is that Bessent is a business-as-usual choice, whereas @howardlutnick will actually enact change," Musk wrote.

But Trump nominated Lutnick for commerce secretary on Tuesday. Axios reported Monday that Warsh was eyeing Fed chair in the future.

Bessent's journey to the top tier of the GOP financial world hasn't been entirely linear, though — it includes years working for the liberal philanthropist George Soros and hosting a fundraiser for Al Gore, a former Democratic vice president.

The billionaire investor spent his childhood in South Carolina. His father went bankrupt investing in real estate, which Bessent later said led him to get his first summer job when he was 9 years old, The Wall Street Journal reported. Bessent attended Yale and broke onto the investing scene after working for Soros' first partner, James Rogers. He joined Soros Fund Management in 1991.

By 2011, Bessent was Soros' chief investment officer, and he was instrumental in the fund's hugely successful bets against the British pound and Japanese yen. In 2015, Bessent broke off to start Key Square. He hasn't talked to Soros in years, The Wall Street Journal said.

In 2011, Bessent married his husband, John Freeman, a former New York City prosecutor. They primarily live in Charleston, South Carolina, with their two children. They spend their spare time preserving historic mansions and used to own an 1880s-era house in Southampton, New York.

Despite his nomination that would put him at the center of Trumpworld, Bessent has a somewhat checkered political history. He disagreed with much of the work Soros did through his nonprofit and has primarily donated to Republican candidates, though he's helped Democrats on occasion. In 2000, Bessent held a fundraiser at his home for Gore's presidential bid.

By 2016, Bessent was inching toward Trump, telling people they weren't taking Trump seriously enough as a candidate. After Trump won, Bessent donated $1 million to his inaugural committee. Though Bessent has known Trump's family for decades, the 2024 election brought him closer to the former and future president — Trump has called Bessent "one of the most brilliant men on Wall Street" and "a nice-looking guy." Rather than slam Bessent for his previous connections to Soros, a favorite right-wing punching bag, Trump appears impressed by how successful he was at Soros' firm.

Bessent donated $3 million to Trump-aligned PACs and Republican committees this election cycle. His support extended beyond his pocketbook, as he frequently conferred with campaign officials on economic plans. Known for his interest in niche economic data, Bessent helped draft speeches and write policy proposals for Trump's economic ideas. By the end of the race, Bessent was fully woven into Trump's orbit; he attended the last two rallies and watched from Mar-a-Lago as election results rolled in.

As treasury secretary, Bessent would face a mixed economic landscape. While unemployment is low and the economy is growing at a healthy clip, Americans remain frustrated by high prices and what they see as runaway inflation. Dubbed a "Trump whisperer" by Forbes, Bessent has signaled support for some of Trump's key proposals.

Among Bessent's top priorities is shrinking the country's significant debt, primarily through increasing growth and, in turn, boosting tax revenues. He has also supported Trump's tariffs proposal, telling CNBC that they should be "layered in gradually" to spread out any inflationary impact. At one point, Bessent floated the idea of a shadow Federal Reserve chair — under his theory, Trump would nominate a replacement to lead the central bank before Jerome Powell's term ends in 2026. After facing blowback, Bessent walked back the idea.

Bessent has advised Trump on a "3-3-3 policy," which the Journal described as "cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation, and producing an additional 3 million barrels of oil or its equivalent a day."

On November 10, the Journal published an opinion piece by Bessent that praised Trump's economic vision. The markets, he wrote, were evidently giddy about the former president's return to the White House. Beyond lavishing praise on Trump, he said that the US should slash bank regulations, overhaul the Inflation Reduction Act, and reinvigorate American energy investment.

"Mr. Trump has turned around the economy before, and he is ready to do so again," Bessent said.

• President-elect Donald Trump is still weighing who should be his next Treasury secretary.
• Trump named one of the early frontrunners, Howard Lutnick, to another cabinet post.
• With Lutnick out of contention, Trump appears to be nearing a final decision.

President-elect Donald Trump has narrowed the field for his Treasury secretary pick.

Two Wall Street stalwarts, Scott Bessent and Howard Lutnick, were widely seen as the frontrunners. On Tuesday, Trump announced that Lutnick would lead the Commerce Department instead. It likely means that the president-elect is narrowing down his list for his last major cabinet pick.

Two weeks after securing his return to the White House, Trump already has nominees in place for the other major cabinet positions. He is tapping Sen. Marco Rubio of Florida to lead the State Department, former Fox News host Pete Hegseth to command the Pentagon, and Rep. Matt Gaetz of Florida to be the next attorney general. Trump's blistering pace of nominations has slowed when selecting his top economic official.

Before Lutnick was taken out of the running, The New York Times reported that Trump had grown irritated with the billionaire's jockeying to get the nomination.

Amid the mostly private knife fighting, the Times reported that Trump has widened the search to include two new prospects: Kevin Warsh and Marc Rowan.

In response to questions about president-elect's process, Karoline Leavitt, a spokeswoman for Trump-Vance Transition, said decisions about the next Trump administration will be "announced by him when they are made."

Here are the top picks Trump is reportedly now considering for Treasury secretary.

Kevin Warsh

Warsh, 54, is a former Morgan Stanley banker and one of the newer contenders.

He was an economic advisor to President George W. Bush from 2002 to 2006 and a governor of the Federal Reserve Board from 2006 to 2011. During the latter period, Warsh was a central figure in shaping the nation's response to the 2007-2008 financial crisis, working to rescue major ailing banks.

More recently, he's been working on Trump's transition team, helping with economic policy and personnel, according to The Journal.

Warsh appears to have been in the president-elect's good graces for several years. Axios reported that Trump praised Warsh as a "really handsome guy" when the two met in 2017 at the White House.

Trump had been floating Warsh that year as a frontrunner for Fed chair. He eventually picked Jerome Powell for the role.

Warsh is often seen as a financial hawk, saying in October that he believed the Fed "doesn't seem to have a serious theory of inflation" and writing in July that it moved too slowly to curb surging prices.

In his July commentary, he blamed inflation on "irresponsible government spending and excessive money printing." Warsh has also been critical of America's burgeoning debt.

Marc Rowan

Rowan, 62, is a billionaire investor who leads Apollo Global Management, which he cofounded in the 1990s. It now has nearly $700 billion in assets under management. Apollo recently announced that it plans to double its assets under management to $1.5 trillion by 2029.

The Journal and the Times reported that Rowan, like Warsh, is one of Trump's new candidates.

The Journal, citing people familiar with the matter, reported that while the billionaire's aides are in touch with Trump, Rowan isn't actively trying to secure the Treasury Secretary role and hasn't spoken to Trump personally about such a position.

But the Times also wrote that Trump has been telling his staff that he's impressed with Rowan, who Bloomberg estimates to be worth $10.9 billion.

Rowan has said that US economic concerns must be fixed by what he called "wholesale change," which he said Trump and his new administration would bring.

That's broadly in line with how Trump has framed his Cabinet picks, as key movers who will upset the status quo and push fresh reform.

Rowan has kept a relatively low profile on his views about government policy, though he recently voiced concerns that the Fed could overstimulate the economy with interest rate cuts.

Scott Bessent

Bessent, 62, was one of the original frontrunners for Trump's Treasury Secretary.

His involvement emerged early last week when Reuters reported that the founder of macro investment firm Key Square Capital Management had been meeting with Trump at the Mar-a-Lago resort.

Bessent worked for the liberal philanthropist George Soros from 1991 to 2015, making a name for himself by betting big against the British pound, which collapsed in 1992, and then against the Japanese yen as it weakened in 2013.

He left Soros' firm in 2015 to start Key Square, and The Journal reported that he hasn't spoken to the billionaire in years.

Bessent has been vocal in his support for Trump, telling Breitbart in August that Vice President Kamala Harris would have crashed the economy if she was president.

He wrote an opinion column just after the election, praising Trump for a stock market rally after his win and knocking 23 Nobel Prize-winning economists for predicting that the president-elect's agenda would be "counterproductive."

The investor laid out his ideas for the economy in his written piece, calling for the Trump administration to reduce government borrowing and to reform President Joe Biden's policies for investment in a "quixotic energy transition."

Bessent has advocated for an economy that's more reliant on tariffs and weaned off income tax, saying the move would restore America's position on the world stage and help curb China's growth.

However, The Journal reported that some conservatives in Trump's circle were concerned about Bessent's past experience working for Soros, who has attracted the ire of the MAGA base for his support of left-leaning causes.

Howard Lutnick — out of the running

The 63-year-old Cantor Fitzgerald CEO is Trump's pick to lead the Commerce Department.

In announcing Lutnick's nomination, the president-elect praised the financial services executive's work on shaping his transition. Lutnick has been serving as Trump's transition cochair with Linda McMahon, of WWE fame. He's been a friend of the president-elect for decades, repeatedly holding fundraisers for Trump.

"Howard has created the most sophisticated process and system to assist us in creating the greatest Administration America has ever seen," Trump said in a statement released by his transition team.

Lutnick has aligned himself closely with Trump's rhetoric. In late October, he expressed a vision for the US economy, describing America in the year 1900 to a crowd at Madison Square Garden, saying it was a time when the "economy was rocking."

"We had no income tax, and all we had was tariffs," he said to a cheering stadium.

As Commerce Secretary, Lutnick will play a big role in shaping Trump's tariff policies.

Update: November 19, 2024 — This story has been updated with Trump's choice of Howard Lutnick for Commerce Secretary.