Treasury Secretary Scott Bessent reportedly told an investor event hosted by JPMorgan Chase that he expects the U.S.-China standoff will de-escalate, characterizing it as unsustainable. The Bloomberg report suggests the Trump administration is looking for a way to climb down after ratcheting Trump tariffs up to 145%. The news gave an extra lift to the S&P 500, but the gains have faded.
This isn't the first time that the administration has signaled a desire to reach an accommodation with China. President Donald Trump said last Thursday, "I think we are going to make a very good deal with China." On April 11, Trump posted, "China wants to make a deal. They just don't know how quite to go about it."
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Did Bessent Shift On U.S.-China Fight?
Beijing has been sending a message that it's digging in for the long-haul. While China stopped matching Trump tariffs once they got to 125%, Beijing has been hitting back with export controls of key materials, including rare earth magnets. Beijing also sent a warning that it would retaliate against any country that strikes a deal with the U.S. involving restrictions on trade with China.
The Trump administration previously backed down on electronics, at least temporarily. The Apple iPhone, PCs, servers and other Chinese-made electronics currently face 20% tariffs, though Trump has said he'll impose sector tariffs on electronics soon.
The ball appears to be in Trump's court, so it's significant that Bessent, whose influence seems to be on the rise, says that a climbdown is coming. Previously, Bessent has said that the U.S. has the upper hand over China because of its massive bilateral trade deficit, which means China's tariffs cover a much narrower swath of U.S.-produced goods.
That seemed to imply that the trade fight was unsustainable for China, so it's possible that Bessent has changed his tune, at least in private. According to a CNBC report, Bessent said that ""no one thinks the current status quo is sustainable."
Bessent predicted a de-escalation in the "very near future," even as he said that negotiations are likely to be "a slog." However, there's no indication that negotiations are underway.
The S&P 500 extended a 2% rally to 2.7% in Tuesday afternoon stock market action following the report on Bessent's remarks, but that faded to 1.5% in early afternoon.
