Treasury Secretary Scott Bessent expressed optimism on Wednesday about the potential for a significant trade agreement with China that would involve reducing tariffs. This prospect would hinge on China’s willingness to shift its economic focus towards greater domestic consumption and a reduction of dependency on manufacturing exports.
Bessent provided these insights during his keynote speech at the Institute of International Finance (IIF) event, followed by a question-and-answer session. He articulated the possibility of a tariff agreement between the U.S. and China, contingent upon China’s economic realignment to prioritize consumption over manufacturing exports.
He stated, “There is an opportunity for a big deal here,” emphasizing the U.S. aim to transition towards increased manufacturing, implying a reduction in consumption. Bessent further explained that if China is committed to reducing its reliance on export-led manufacturing growth and pursuing a dual circulation strategy that emphasizes domestic economic development, it presents a significant collaborative opportunity.
In his address, Bessent detailed the rationale behind the Trump administration’s stance on the need for China to rebalance its economic system. He referenced recent data indicating a tendency in the Chinese economy to favor manufacturing over consumption, which could exacerbate imbalances with trading partners if the current trajectory remains unchanged.
“China’s current economic model relies on exporting to alleviate its economic challenges, which is unsustainable and detrimental not only to China but also globally,” Bessent remarked. He highlighted the universal acknowledgment of China’s need for economic reform and expressed the U.S. readiness to support this transition.
Bessent underscored the potential global benefits of China redirecting its economy to prioritize domestic consumption, suggesting this change would foster a more stable international economic equilibrium. By addressing export overcapacity and enhancing support for domestic demand, China could significantly contribute to the global economic rebalance that is critically needed.
This situation continues to evolve, and updates are expected to emerge.
