U.S. Treasury Anticipates Imminent Trade De-escalation with China

U.S. Treasury Secretary Scott Bessent stated at a private summit on Tuesday that the ongoing tariff confrontation with China is unsustainable. Bessent emphasized the need to find mechanisms to ease the trade tensions, as the current situation is unviable for both powers.

Possible De-escalation in the Near Future

During the event, organized by JPMorgan Chase & Co. in Washington, Bessent anticipated a trade de-escalation in the near future. He described the relationship between the two countries as a “de facto trade embargo,” highlighting the seriousness of the situation.

U.S. Not Aiming to Decouple from China

Bessent emphasized that the U.S. does not seek to decouple from China, although he warned that the current tariffs, with 145% on Chinese goods and 125% on U.S. products, are unsustainable. He expressed optimism about a possible de-escalation in the coming months but noted that a comprehensive agreement would take longer.

Trump Highlights Positive Relationship with China

President Donald Trump, when asked, remarked that the relationship with Beijing was “going quite well” and did not foresee an aggressive negotiation. He assured that they would “treat China very well” and that the final tariff would not approach the current 145%. Trump emphasized that a final agreement would be inevitable if China wants to continue trading with the U.S.

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Structural Agreement on the Horizon

Bessent estimated that a structural agreement between the U.S. and China could be reached within two to three years. He stated that China has favored manufacturing over domestic consumption, negatively impacting the U.S. He stressed that any future agreement must allow the U.S. to strengthen its industry.

Impact on Financial Markets

Bessent’s remarks boosted financial markets. The S&P 500 index rose by 2.9%, closing with a 2.5% gain in New York. Additionally, the dollar strengthened, and Treasury bonds stabilized.

Progress in Trade Negotiations

The White House also showed optimism about trade progress, though no concrete details were confirmed. Karoline Leavitt, White House spokesperson, reported that 18 countries had submitted trade proposals and that the president’s negotiating team would meet with representatives from 34 nations during the week.

Possible Agreements with Japan and India

Politico reported that the White House might announce preliminary agreements with Japan and India. These agreements would establish frameworks for specific issues, with developments stretching over several months or even years.

Bessent’s Upcoming Intervention

Bessent participated in the spring meetings of the IMF and the World Bank, where finance ministers and central bank governors discussed the aftermath of the trade war. He is expected to give another speech at the International Institute of Finance forum, where he will share his perspective on the global financial system.