Treasury Secretary voices tariff negotiation updates with China
In this DML Report…
U.S. Treasury Secretary Scott Bessent stated that China must take the first step to de-escalate the ongoing trade war, citing the significant trade imbalance where China exports five times more to the U.S. than the U.S. exports to China. Speaking on CNBC’s “Squawk Box,” Bessent described the current 145% U.S. tariffs on Chinese goods and China’s 125% retaliatory tariffs as unsustainable, effectively creating a mutual trade embargo. He noted that the U.S. is actively negotiating with 15 to 18 key trading partners, with India likely to be among the first to sign a trade deal, while discussions with China remain limited, and no formal negotiations have started.
The trade tensions stem from President Donald Trump’s broad global tariffs, followed by a decision to maintain 10% across-the-board tariffs while pausing harsher levies for 90 days to allow negotiations. Bessent highlighted progress with countries like Japan, South Korea, and Switzerland, but emphasized that China’s economic model, reliant on export-driven manufacturing, must shift toward domestic consumption to stabilize global trade. He also criticized the World Bank for lending to advanced economies like China, arguing it diverts resources from poorer nations and hampers private market development. Markets have reacted positively to signs of potential de-escalation, with the S&P 500 rising 1.67% on April 23 after Bessent’s earlier remarks.
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Despite Trump’s claims of frequent talks with Chinese officials, including President Xi Jinping, Bessent clarified on ABC’s “This Week” that he was unaware of any direct calls between the leaders, and interactions with his Chinese counterpart focused on financial stability and global economic warnings during IMF meetings. China’s Commerce Ministry and Foreign Ministry have denied ongoing trade negotiations, insisting on equal treatment and the removal of unilateral tariffs. The trade war’s impact is already felt, with risks of empty store shelves in three weeks and a potential U.S. recession by summer 2025, according to Apollo economist Torsten Slok. Bessent remains optimistic about achieving clarity on tariff levels by Q3 2025, projecting U.S. economic growth at 3% through Trump’s policies.