The euphoric stock market rally that followed Donald Trump’s election victory largely brushed aside his vow to hike tariffs across the board with even higher rates on China.
That’s as many on Wall Street assumed his tough talk was more of negotiating strategy to obtain better trade deals. In that vein, a Barclays note on Thursday said, “We think the president-elect should be taken seriously, but not literally.”
But the increasingly public battle over who will be Treasury secretary in the second Trump administration offers a clue on whether that premise will hold true.
Sources told the Financial Times on Sunday that Trump’s advisers are seeking assurances from the top candidates that they are committed to his aggressive tariffs.
The report added that pressure has been particularly heavy on hedge fund manager Scott Bessent, who told the FT in a prior interview that Trump’s tariff plans were “maximalist” positions that would probably be watered down in negotiations.
“My general view is that at the end of the day, he’s a free trader,” he said about Trump last month. “It’s escalate to de-escalate.”
But on Friday, Bessent authored an op-ed on Fox News that praised tariffs as a revenue-raising tool and a way to protect strategic industries while also saying that optimistic forecasts from free trade advocates haven’t panned out.
A spokeswoman for the Trump transition team didn’t directly address the FT report, only saying that he is making decisions on who will serve in the administration and that those decisions will be announced when they are made.
Meanwhile, Elon Musk endorsed Howard Lutnick, the CEO of financial services firm Cantor Fitzgerald and co-chair of Trump’s transition team, for the Treasury role on Saturday.
The Tesla CEO, who has become increasingly influential in Trump’s circle, posted on X that “Bessent is a business-as-usual choice, whereas @howardlutnick will actually enact change.”
Soon after, Robert F. Kennedy Jr., who is Trump’s pick to lead the Health and Human Services department, also endorsed Lutnick, saying on X that he will be a strong Bitcoin advocate.
Sources told Bloomberg on Sunday that Bessent spoke with Musk after his post on X endorsing Lutnick.
On the prediction market Kalshi, Lutnick’s odds of becoming Trump’s Treasury secretary shot up to 53% on Sunday from 45% on Saturday night and 20% on Friday night. Bessent’s chances plunged to 40% from nearly 79% on Friday.
Higher tariffs would be a significant headwind on stocks. According to UBS, even the low end of Trump’s plan for 10%-20% tariffs across the board could result in a 10% stock selloff as earning for S&P 500 companies decline.
Tariffs were a centerpiece of Trump’s campaign along with a crackdown on immigration. He has said revenue higher tariffs generate can offset what’s lost from expanded tax cuts, even though budget experts are skeptical.
But Wall Street is hopeful that Trump’s fixation on the stock market will also help temper his plans for tariffs, if they trigger a selloff.
“Threatening tariffs to gain advantage in trade negotiations is one thing, but imposing them is another,” said Mark Malek, chief investment officer at Siebert, told Bloomberg.
This story was originally featured on Fortune.com