US Treasury Secretary Scott Bessent on Tuesday said that the ongoing tariff war against China is unsustainable, saying that a ‘de-escalation’ in the trade war between the two nations is expected in the near future.
At an exclusive speech in Washington for JPMorgan Chase, Bessent warned that negotiations between the US and China were yet to officially begin.
The Trump administration last week introduced a blanket new tariff of up to 245 per cent on Chinese imports, sparking a fierce intensification of the trade war between the US and China. The move was outlined in a fact sheet made public by the White House.
US Tariff on China
“China now faces up to a 245% tariff on imports to the United States as a result of its retaliatory actions,” the White House said.
This tariff rate consists of a 125 per cent reciprocal tariff, a 20 per cent tariff to respond to fentanyl crisis, and Section 301 tariffs on certain products, 7.5 per cent to 100 per cent.
China’s Response and Market Impact
China, in turn, retaliated against Trump’s tariffs with a 125 per cent tariff on US goods and stated that Washington’s imposition of “abnormally high tariffs on China seriously violates international and economic trade rules.”
The broad Trump tariffs against various countries have caused the stock market to fall down and interest rates on US debt to rise as investors’ fear of decelerating economic growth continued to hang over it.
Outlook for De-escalation and a Future Agreement
“I do say China is going to be a slog in terms of the negotiations,” The Associated Press quoted Bessent as saying. “Neither side thinks the status quo is sustainable,” he added.
He also said that a de-escalation of the trade war between the world’s two largest economies will come in the very near future. He said at the JPMorgan Chase event that a comprehensive deal between China and the US could happen in two to three years.
Little after Bessent’s comments, US shares bounced back, the S&P index rising as high as 2.9 percent, a report by Bloomberg noted.
Potential Trade Deal with China
The Donald Trump administration so far has held talks with representatives of Japan, India, South Korea, the European Union, Canada and Mexico, among other countries, to discuss the US tariffs.
Though there is a possibility of negotiations regarding his comprehensive reciprocal tariffs, the US president has not made any public indications that he will eliminate his starting-point 10 per cent tariff.
White House press secretary Karoline Leavitt explained to the press that Trump had informed her “we’re doing very well” about a “potential trade deal with China.”
On Monday, China warned other nations against negotiating trade agreements with the US that might hurt Beijing. The Chinese commerce ministry stated in a release, “China firmly opposes any party reaching a deal at the expense of China’s interests.”
Financial Markets and the Fed Factor
Leavitt has stated that until now the Trump administration has seen 18 bids from other nations for their own respective trade agreements with Washington, adding that “everyone involved wants to see a trade deal happen.”
The tensions within the financial markets have also been greatly heightened due to Trump’s urging the Federal Reserve to lower its benchmark interest rate and his declaration that he could remove Fed Chair Jerome Powell if he were to desire so.
Leavitt wrote that Donald Trump thinks the Fed is holding back by keeping rates constant as it waits for the effects of tariffs “in the name of politics, rather in the name of what’s best for the American economy.”
Moreover, a Politico report also mentioned that the White House was on the verge of making an announcement about a high-level agreement with both Japan and India. Although, these are anticipated to significantly indicate a willingness to negotiate on particular issues pending detailed design.
