Hassett and Bessent set the agenda for markets with two big policy themes. Kevin Hassett argued that an AI-driven productivity surge is already lowering costs and could allow robust growth without inflation. Scott Bessent warned that China is expanding export controls on rare earths and that U.S. firms are seeing supply slowdowns. Short term this fuels sector rotation and volatility. Long term it points to higher productivity and renewed geopolitically driven supply chain risk across the US, Europe, and Asia.
Policy headlines that will steer the trading session
White House economic adviser Kevin Hassett told an Axios News Shapers event that AI is producing a real productivity shock. He said the supply side is moving up and that prices are being pushed down. He compared the moment to the computer revolution in the 1990s under Alan Greenspan. That comparison matters because it frames a view where strong growth and low inflation can coexist.
Hassett also urged greater transparency at the Federal Reserve. He said the Fed should explain its models and mistakes. That comment adds to market scrutiny of central bank communication and of the process to pick the next Fed chair. Hassett is reported to be one of five finalists for the job that opens in May. Policymaker views on the neutral rate and the timing of rate changes will be priced by traders when data arrives.
China’s export controls: a flashpoint for supply chains and tariffs
Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer raised the alarm about Beijing’s proposed export controls on rare earth minerals. Greer said the rule risks violating a pact from earlier this year and gives China leverage over global supply chains. Bessent went further and said that Chinese explanations for recent slowdowns are not credible. He noted that some U.S. firms have reported a slowdown in magnets and other critical components.
China intends for the measures to take effect around November 1. The Trump administration has threatened steep tariffs in response, including a previously floated 100% tariff. That puts markets on edge because rare earths are critical for electric vehicles, defense systems, and AI hardware. The immediate reality is that a supply interruption or the threat of higher import taxes can raise costs for manufacturers and push firms to reconfigure sourcing strategies globally.
Sector implications: who gains and who faces pressure
The interaction of an AI-driven productivity story and heightened trade friction creates a mixed read for sectors. Technology companies and data center operators are likely to remain in focus as AI lifts capital spending on chips and cloud capacity. Investors will watch revenues tied to AI software, chip design, and data center services closely.
At the same time, industrials and auto suppliers face direct pressure from rare earths controls. Automotive manufacturers that rely on high-performance magnets for electric motors may see margins squeezed or production schedules delayed. Defense contractors could also feel strain if component flows tighten. Mining companies that extract or process rare earths become strategic assets in this scenario, while nations with alternative supplies gain geopolitical importance.
Treasury yields and the dollar are likely to respond to both threads. If markets embrace the idea that AI is deflationary, that could ease inflation expectations and put downward pressure on short-term yields. Conversely, a trade escalation that threatens economic activity and forces fiscal responses may push yields up at certain maturities. Fed communication about policy strategy will be central to how this plays out across the curve.
Trading session preview and watchlist
For the coming trading session, traders will parse official language from the Treasury and any follow up from the White House. Market attention will focus on additional details of China’s export control rules, any formal tariff announcements, and further commentary from officials on supply disruptions. Firms reporting supply issues for magnets and rare earth components will be especially relevant for industrial and auto sector moves.
Data releases that influence inflation expectations and growth forecasts will interact with these political flows. Market participants will also track commentary about Fed governance and transparency. That could affect forward rate pricing and volatility in rate-sensitive assets. Equity performance will likely separate winners from losers as investors weigh durable AI-driven demand against shorter term trade and supply risks.
Positioning may shift across regions. U.S. markets will respond to domestic trade policy signals and Treasury commentary. European and Asian markets will price in both the global supply chain implications and regional exposure to China. Emerging markets with exports tied to rare earths or to AI hardware supply chains may see outsized moves on policy news.
Context and historical comparison
Hassett’s Greenspan analogy is instructive. In the 1990s the computer revolution pushed productivity and allowed low unemployment to coexist with price stability for several years. If AI reproduces that dynamic, it could reshape medium term growth and the structure of corporate investment. The difference today is that the rise of AI occurs alongside heightened geopolitical competition and concentrated mineral supply chains. That combination means gains from productivity could be interrupted by political actions that raise costs for specific sectors.
Markets will weigh both threads. In one reading, AI-driven gains support earnings and reduce inflation pressure. In another reading, trade measures and export controls force strategic adjustments and raise sectoral costs. The near term is dominated by headlines and policy signals. The longer term will be measured by investment flows into AI capacity and by how supply chains are reconfigured in response to export controls.
Overall, the policy comments from Hassett and Bessent create a session where technology optimism and supply chain risk battle for market attention. Traders will watch official moves for cues on tariffs, rare earth availability, and any shifts in monetary policy communication. That combination will shape trading ranges for specific sectors and for rates across the curve.
