The pandemic did not create our brittle supply chains so much as expose them. Suddenly, the world's most advanced economy found itself partially dependent on foreign suppliers for semiconductors, large capacity batteries, critical minerals, and medicines that we no longer produced here at home. Regrettably, our recovery from the pandemic did not bring reform under the prior administration. Today, the United States still imports most of its rare earth minerals that are essential to the technologies that will shape military and economic power in the 21st century. Only a small share of the active pharmaceutical ingredients that we use in the United States are made here. And American shipbuilding capacity, which once helped to secure victory in war and prosperity in peace, has shrunk to a fraction of global production. So when I say America has been asleep, I do not mean that no one warned us. In fact, many did. Workers warned us when their plants shuttered and communities decayed. Military planners warned us when supply chains narrowed. Manufacturers warned us about subsidized competitors and dumped products. Public health officials warned us about pharmaceutical dependencies. The warning lights were glaring all around us. But our political class preferred the comfort of old formulas. Cheaper was always better. Offshoring was inevitable. Industrial policy was unfashionable. And strategic dependence was acceptable so long as the cost remained invisible. Beneath every one of those mistakes lay a more basic failure in our philosophy. In reducing economics to consumption, we forgot production. We measured abundance at the checkout counter rather than at the factory gate. We talked about GDP but not enough about its composition. And we prized low-cost inputs without first asking whether a nation can remain sovereign when it loses command over the things that matter most. A country cannot outsource its industrial commons, ignore strategic concentration, and expect to remain secure. For manufacturing is more than output on a balance sheet. It is a reservoir of practical capability: engineers and welders, tool and die makers, and logistic networks, plant managers and workers who know how to solve problems on the factory floor. When the ecosystem is strong, a country can adapt quickly. When it is hollowed out, adaptation becomes slower, more costly, and less certain. We saw this during COVID and the scramble for ventilators, masks, and other medical equipment. We saw it again as the war in Ukraine reminded the world that high-intensity conflict consumes weapons and munitions at a pace far beyond peacetime assumptions. Surge capacity cannot be conjured overnight. It must be built before a crisis arrives. And a country that allows its industrial base to shrink in the quiet years should not be surprised when it struggles to replenish stocks in the dangerous ones. In a crisis, the nation with a broad and skilled industrial base has options. The nation that has hollowed out that base only has excuses. America should never again put itself in a position where its security depends on supply chains it does not control, factories it no longer maintains, or skilled trades it failed to preserve. That is why the president's agenda matters. Reasonable people can debate the calibration of any particular instrument, but the central strategic insight is undoubtedly sound. Trade policy, industrial capacity, and national security are inseparable. And to allow foreign dependencies to degrade any one of these domains is to allow them to define America's future. So on his first day back in office, President Trump issued the America First Trade Policy Memorandum, a sweeping directive to Treasury, Commerce, Homeland Security, USTR, and other agencies to stop treating trade as a technocratic afterthought instead of an instrument of national strategy. Last April, the president declared a national emergency tied to the cumulative effects of foreign trade practices and announced reciprocal tariff actions framed explicitly around national and economic security. Again, people can debate design, sequencing, and scope. Healthy democracies should debate those questions, but no one should miss the larger point. Chronic non-reciprocal agreements, industrial hollowing, and strategic import dependence are not questions of commerce alone. They are fissures in our country's foundation. A few weeks later, President Trump signed executive action on processed critical minerals and derivative products under Section 232, expressly linking import dependence to risk for national security, defense readiness, price stability, and economic resilience. Some have tried to weaponize critical minerals against us, but this administration is ensuring they will not succeed. On maritime strength, President Trump signed an executive order to restore America's maritime dominance, established a new Office of Maritime and Industrial Capacity at the National Security Council, and called for a maritime action plan to rebuild U.S. shipbuilding capabilities. This is what it looks like to connect industrial capacity, logistics resilience, workforce development, and national security in one strategic frame. Finally, on pharmaceuticals, President Trump signed an executive order to fill the strategic active pharmaceutical ingredients reserve so that America is never again caught flatfooted when access to critical drug components is at risk. Last month, the White House also highlighted further action to impose tariffs on patented pharmaceutical products while noting parallel Section 232 investigations involving personal protective equipment, medical consumable devices, and robotics. The strategic message is unmistakable. Supply chain resilience in medicine will no longer be an afterthought. This broader reorientation is also visible in the administration's trade agenda for 2026 as we work to secure reciprocity, strengthen domestic production, and align America's external economic relationships with our core national interest. Taken together, these efforts reflect the broader principle that President Trump has articulated clearly: economic security is national security. But let me be direct about what that doctrine does not mean. It does not mean retreating from the world. On the contrary, it means engaging with it on stronger, fairer, and more sustainable terms. It does not mean severing ties indiscriminately. It means distinguishing healthy interdependence from dangerous overdependence. It does not mean rejecting efficiency. It means refusing to worship efficiency when efficiency leaves our nation exposed. And it does not mean treating allies and adversaries alike. It means bringing our trading relationships and our security relationships back into alignment by building supply chains with trusted partners where appropriate, rebuilding capacity at home where necessary, and ensuring that the economic architecture supporting American power strengthens American security. Of course, America still holds enormous advantages. Among them, the world's deepest capital markets, extraordinary innovators, abundant energy potential, leading universities, an unmatched entrepreneurial culture, and workers who can outbuild and outcompete anyone so long as the playing field is fair. All we needed was a government willing to declare that as decline is a choice, renewal can be won, too. So yes, while America slept, our vulnerabilities grew. While America slept, too many leaders accepted failed supply chains as the price of modern life. While America slept, we let industrial policy erode and Main Street decay. We tolerated unfairness in the name of stability and conflated market access with strategic success. But America has awakened. We are alert to the fact that a resilient economy is the foundation of a strong republic. That we can measure the health of our economy not merely by what it produces but whom it lifts. That secure supply chains matter as much as stock indices. That productive capacity is power. That trade policy, industrial policy, and national security policy must all fit together or they will each fail separately. So, let me end where I began with President Reagan's reminder to identify where we went wrong and to recover our faith in what can go right. If we learn from our mistakes, if we rebuild what we neglected, if we reward production as well as consumption, if we prize resilience alongside prosperity as President Trump has been doing, then this country will not simply patch over our vulnerabilities. It will enter a new season of national strength with a more robust Main Street and industrial base than ever before. Safer supply chains, more secure medicines, more reliable access to critical minerals, a revived maritime capacity, a financial system aligned with national purpose, and trading partnerships that reinforce rather than undermine our security relationships. Indeed, the strength of this republic lies in not denying that the old consensus failed. Instead, we must restore resilience where complacency took hold, rebuild capacity where dependence took root, and above all, recover the confidence to believe a nation that knows how to build, invent, produce, and lead is never destined for decline. While America slept, our vulnerabilities grew. But under President Trump's leadership, we are alert to the risk we can no longer ignore and attuned to the responsibility we can no longer defer. Under President Trump, we have awakened to morning again in America, and our best days, I believe, still lie ahead. Thank you all. I look forward to exploring these themes in further conversation with Larry. Thank you.
Ladies and gentlemen, please welcome to the stage the Honorable Lawrence Kudlow for our keynote conversation with the Honorable Scott Bessent.
Thank you. Thank you everybody. Thank you, Mr. Secretary, for an excellent speech. I was just sitting there thinking, having worked for Reagan many, many years ago, peace through strength. Peace through strength. It hasn't changed. It hasn't changed between those two bookends and it's a terrific thing. Peace through strength. Trust but verify. And we'll get to, I want to talk about the industrial economy because your points are very important. The America First Trade Policy, the economy is booming, but I, you know, must ask, the world is waiting, I guess, for new information. The president is meeting with the cabinet. I'm sure you're plugged into this remotely. How do you read the situation? Are we close to a deal? The last Truth Social I got said basically they're looking at the issues, but the red lines have not changed with respect to denuclearization and no enrichment and reopening the Strait of Hormuz and no money in the next 30 or 60 days. It's a little sketchy, but the whole world is watching. The markets are positively reacting to it. So I thought I'd give you a chance to clarify the situation, give us your thoughts.
Yeah. So the president was very clear in the cabinet meeting what he was looking for on the straits, free and open access as we saw before February 27th, and that Iran must give up their highly enriched uranium and cannot have a nuclear weapon. And to be clear, I think one of the things that has gone unappreciated and unnoticed here is this is the first time the Iranians have been willing to discuss the nuclear subject. Like, you know, before, we have the right to do this, we have undisputed. And so I think between five and a half, six weeks of an incredibly successful military campaign and then Operation Economic Fury where we have really cut them off, and you know, they are at the end of their tether now financially. I think 40 or 50% of the troops aren't getting paid, police aren't reporting to the station, inflation's probably over 200%. They're having to give out food vouchers. They have turned off the internet. So there was an information vacuum and we'll see as the Iranians have engaged as they could. I would point out we did not have regime change, but we changed the regime. The first level leaders decapitated, the second level decapitated. So we're dealing with the third level. And it's very tough because on one side we have a theocracy with the clerics. On the other side, we have a thugocracy with the IRGC. And you know, you've got to convince both sides.
I think kudos to you. You're probably the most significant, most powerful, most successful wartime Treasury Secretary certainly since World War II. You've closed them down. They are our enemies. In fact, Roger Zakheim reminds me, Reagan Institute did a poll. 80% of Americans, 80% of Americans believe Iran is an enemy of the United States. Now, where the other 20%... I don't know who the other 20 are. They're all in New York and Connecticut. Leave that aside. But what you have done with the economic fury, you basically turned their water off. Maybe you want to say how long can they go? They're not meeting payrolls. They're not meeting retirement. They're not showing up for work. You closed down their offshore bank accounts. You've closed down their oil operations. You basically closed the whole place down. It's kind of all over but the shouting, it seems to me.
Well, Treasury, we're doing the financial blockade and the U.S. Navy, who you want to tell you about a group that hasn't been this active since World War II, it's the Navy. Yes. They've done an incredible job. And you know, when I talked to General Kane and Secretary Hegseth, they said like these young people aren't afraid. They want to fight. They signed, this is what they signed up for. And some of the precision where they blockaded the Iranian ports with virtually or perhaps zero intrusions have been amazing. Kharg Island, which is the Iranian oil export facility, is shut down. You basically turned that off. The blockade did that. We think they have the lowest amount of oil on the water. Their only client is China. And one, I would point out that the Iranians made a very big strategic mistake because everyone said, 'Oh, well, you know, the Iranians attacked the GCC and the infrastructure and that really makes them invulnerable.' That on my side of my duties, they made my job so much easier because before, many of our great Gulf allies were a little less than transparent about their banking system that, 'Oh no, we don't have any Iranian oil.' And going to 2,200 shells and missiles and drones here, five or six hundred there. All of a sudden it's, 'Oh, here, have at it.' So you know, we've frozen Iranian bank accounts after they started getting bombed by Iran. Yes. But it was a big strategic failure on the financial side and we jumped right in. And they've been very good partners. I believe that we have seized about a billion dollars of their crypto and just outright grabbed the wallets. Some of them may be typing in right now and realize they might not have realized that their wallet had been grabbed. And we are working with our allies all over Europe to grab, you know, villas and houses and properties. And this is money that's stolen from the Iranian people. We think they were stealing four or five hundred million a month divided between 80 leaders.
But you've frozen the offshore accounts. I mean, people may not understand that the Revolutionary Guard, they own so many of the businesses. They've been stealing money from the Iranian people for decades and decades and decades, and they're all living high off the hog, you know, retirement accounts and condominiums, God knows where.
Well, that can't last. I mean, they're in financial trouble. That is your doing. That is your doing, sir.
Well, it's like Woody Allen said when he talked about the mafia, it's a good margin when you consider they don't pay for paper clips. Okay, I got it. All right. Well, anyway, congratulations on all that. Second point I wanted to raise, and you talked at some length about it in your prepared remarks, that the economy, the industrial economy is booming despite gasoline prices and energy prices and the temporary effects of the war. Just some numbers. I mean, with $4.50 gasoline, which I might add is coming down, you're still growing. I mean, nearly 3% consumer growth from the latest numbers year. But the most extraordinary thing, and I think this is to your point about the trade reciprocity and the America First and being prepared, non-defense capital goods, business investment is growing over the past three months alone at nearly 19% at an annual rate. We haven't seen numbers like that. 10.5% year-on-year. That's quite remarkable. Shipments growing at 12.5%, profits rising 17%, productivity at almost 3%, unit labor costs, which is the most basic in a sense inflation measure for the entire economy, unit labor costs last four quarters 1.2%. That's why I can't get too excited about a temporary gasoline pump. I mean, in effect, the trade deficit is narrowing, the One Big Beautiful Bill and other policies have been succeeding. It's been fantastic and much of it is what you all did in Trump 1.0, the Tax Cuts and Jobs Act, but through, you know, I see Jason Smith here that he was working a year in advance to get the One Big Beautiful Bill that did not spring up. You know, I see French Hill, Jody Arrington, they were all incredible in getting this across the line. I remember I went to Mike Johnson. I said, 'Mike, when do you think you can get this out of the House?' And he said, 'I think I can.' I said, 'And as one bill.' And Larry, I want to give a shout out to you because Dr. Kudlow here said, 'You must have it as one bill. You cannot bifurcate this because if people start picking and choosing, then it's the end.' So Larry insisted on one bill that Mike, Speaker Johnson, if we want one bill, how do we do it? Or when can we do it? And he said, I think I could have this out by Memorial Day. I said, please. I called up Newt Gingrich and I said, could this ever happen? And he said, it's ambitious. Okay, Mike, let's do it. And then as soon as he did that, they called Leader Thune and said, 'Speaker Johnson says it's going to come out of the House by Memorial Day. You think we could have a July 4th signing?' And okay, and everybody got it done. But I think, you know, it just speaks to the power of what we've done. We are never going to have to talk about a tax cut again because these are permanent. And you know, I just think the power of permanence and certainty and knowing that you're going to be able to, like, this full expensing just levels us up against so many other countries.
You know, business is not a dirty word. Profit's not a dirty word. The reason that consumers have the income to spend at their kitchen tables, even with this temporary gasoline bump, is the success of these policies. And I think the permanence, we've never seen investment rates like this, probably not since the Reagan recovery from the Carter recession some 40-odd years ago. So supply-side economics is working and the America First policies are working. So kudos to you for your implementation. Kudos to the president for sticking with it. Kudos to Jason and whoever else is here. I didn't know you were here. Good to see you. No change in policy. The war will end. We will go back to normalcy on energy.
Look, the war will end. We'll get to the other side of this. The economy has been very resilient through all this. Look, for many families, it's not nothing, but it's been less than $200 in extra the gasoline cost. And, you know, I don't have it with me, but all the Democrats want to talk about now is beef and gasoline. And eggs are down 90% now. Beef is highly idiosyncratic now because of some cattle disease down in Mexico and the dynamics of the herd, but chickens down, many, many vegetables are down. So, you know, groceries are actually down. You know, so we'll see. And but I can tell you the one thing we're not going to do is what the Biden administration did where they came out and said it's a vibe session. The American people don't know how they're feeling. That was 21.5% stated CPI inflation. Real wages grew about 17%. So big loss in purchasing power. But our friend Jason Trennert has something, I think it's called the Everyman Index or the Common Man Index, and that was up 35 or 38%. So that was a 15% decline, 16% decline in real purchasing power and Americans felt that and the price levels have gotten elevated. It's tough to bring the price level down, but what we can do is add, we can generate real wage growth, which I think we're going to get back to as soon as we're on the other side of this Iran conflict.
