U.S. Treasury Secretary Scott Bessent said in a Tuesday speech that the ongoing tariffs showdown against China is unsustainable and he expects a “de-escalation” in the trade war between the world’s two largest economies.
But in a private speech in Washington for JPMorgan Chase, Bessent also cautioned that talks between the United States and China had yet to formally start. U.S. President Donald Trump placed import taxes of 145% on China, which has countered with 125% tariffs on U.S. goods.
Trump has placed tariffs on several dozen countries, causing the stock market to stumble and interest rates to increase on U.S. debt as investors worry about slower economic growth and higher inflationary pressures.
Details of Bessent’s speech were confirmed by two people familiar with the remarks who insisted on anonymity to discuss them.
“I do say China is going to be a slog in terms of the negotiations,” Bessent said according to a transcript obtained by The Associated Press. “Neither side thinks the status quo is sustainable.”
The S&P 500 stock index rose 2.5% after Bloomberg News initially reported Bessent’s remarks.
Trump acknowledged the increase in the stock market in remarks to reporters afterward on Tuesday, but he avoided confirming if he, too, thought the situation with China was unsustainable as Bessent had said behind closed doors.
“We’re doing fine with China,” Trump said.
Despite his high tariffs, Trump said he would be “very nice” to China and not play hardball with Chinese President Xi Jinping.
“We’re going to live together very happily and ideally work together,” Trump said.
The U.S. president said that the final tariff rate with China would come down “substantially” from the current 145%.
“It won’t be that high, not going to be that high,” Trump said.
The Trump administration has met for talks with counterparts from Japan, India, South Korea, the European Union, Canada and Mexico, among other nations. But Trump has shown no public indications that he plans to pullback his baseline 10% tariff, even as he has insisted he’s looking for other nations to cut their own import taxes and remove any non-tariff barriers that the administration says have hindered exports from the U.S.
China on Monday warned other countries against making trade deals with the United States that could negatively impact China.
“China firmly opposes any party reaching a deal at the expense of China’s interests,” China’s Commerce Ministry said in a statement.
White House press secretary Karoline Leavitt said the Trump administration has received 18 proposals from other countries for trade deals with the U.S., adding that “everyone involved wants to see a trade deal happen.”
Trump: ‘I have no intention’ of firing U.S. Fed chair
The uncertainty over tariffs in the financial markets has also been amplified by Trump calling on the Federal Reserve to cut its benchmark interest rate, with the president saying he could fire Fed Chair Jerome Powell if he wanted to do so.
Leavitt said Trump believes the Fed has held rates steady as it awaits the impacts of tariffs “in the name of politics, rather in the name of what’s right for the American economy.”
Trump later said that he wanted Powell to “be early” in lowering rates and that he has no plan to fire the Fed chair, despite previously suggesting that he would.
“I have no intention of firing him,” Trump told reporters.
Powell has said that Trump’s tariffs are creating uncertainty about slower growth and higher inflationary pressures, while the president maintains that inflationary worries are essentially non-existent.
The president maintains that energy and grocery prices are falling, so the Fed should cut its benchmark rates because inflation is no longer a threat to the U.S. economy, Trump said. His remarks indicated that he still plans to use the bully pulpit to pressure a U.S. central bank that is committed to resisting political pressure as part of its mandate to stabilize prices and maximize employment.
Trump’s frustration led him to post on social media last Thursday: “Powell’s termination cannot come fast enough!”
The Fed chair’s term ends in May 2026.
On Tuesday, Trump continued to air his grievances about Powell, even though he said the Fed chair would stay on the job despite the president’s belief that inflation is no longer a problem.
“It’s all coming down,” Trump said. “The only thing that hasn’t come down, but hasn’t gone up much, are interest rates. And we think the Fed should lower the rate. We think that it’s a perfect time to lower the rate. And we’d like to see our chairman be early or on time, as opposed to late. Late’s not good.”
Trump again attacked Powell on Monday on his Truth Social account, saying that “there is virtually No Inflation.”
The comment built on a statement by Trump last week that said he believed he could fire Powell, a move that shook financial markets and frightened investors that interest rates might be subject to politics instead of economic fundamentals.
“If I want him out, he’ll be out of there real fast, believe me,” Trump said in the Oval Office last Thursday. “I’m not happy with him.”
The Fed has held off on further reductions to its federal funds rate, which influences the money supply by setting the interest rate that banks can charge each other for overnight loans. That rate is effectively 4.33%, down a fully percentage point since last August as inflationary pressures appeared to ease.
The Fed had initially raised that rate because of inflation spiking during Joe Biden’s presidency, a byproduct of the global economy recovering from the COVID-19 pandemic and higher energy and food prices after Russia invaded Ukraine in 2022.
But Powell has also been willing to challenge the president’s trade policies. He said last week in a Chicago speech that Trump’s tariff policies would hurt the U.S. economy, a direct warning to a White House trying to sell the import taxes as a long-term positive for the country.
“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects which will include higher inflation and slower growth,” Powell said last week at the Economic Club of Chicago.