US Treasury Chief: China Must Take Lead in De-escalating Trade Tensions

Scott Bessent, Secretary of the Treasury, has made it clear that easing current trade tensions is the responsibility of China. In an interview with CNBC's Squawk Box, Bessent explained that the trade relationship between the US and China is heavily tilted in China's favor, with it selling five times more goods to the US than it gets in return. He highlighted the steep tariffs, 120% to 145%, are unsustainable and suggested that China take some steps toward making the trade relationship a little more balanced. That, he said, would de-escalate the current situation, which is in China's best interest.

Market uncertainty has been heightened by President Donald Trump's announcement in early April of global tariffs affecting pretty much all trade partners. Although the metal tariffs have been put on hold for 90 days while negotiations are carried out, the pressure is very much on for talks to produce something that all sides can live with.

Signs of Progress with Other Trading Partners

Although there are many problems with China, Bessent had a much more optimistic view of our other trade partners. He said that the U.S. has been given very promising signals from a number of countries and expects to see new trade agreements with them very soon. One country he seemed to suggest could be a front-runner for announcing a deal was India. He indicated that developments concerning a trade agreement with India might be announced in the next few days.

Currently, about 15 to 18 major trading relationships are under negotiation. Bessent said that many countries have put forward very strong proposals, and the administration is taking a close look at them. His remarks suggest that even as the China situation looms large, steps taken with other countries could, in the end, serve to cushion the U.S. economy.

Europe Grapples with a Strong Euro

Focusing on Europe, Bessent proposed that the region's monetary policymakers are expressing heightened concern over the euro's strength against the U.S. dollar. Since the onset of 2014, the euro has appreciated almost 10%, reversing dangerously close to parity levels in early January, not to mention the sort of levels that almost got European leaders to endorse currency interventions back in 2012.

He forecast that the European Central Bank might have to reduce interest rates to combat the euro's ascent. While the US keeps a strong-dollar policy, European countries are probably looking for ways to maintain their currency's value in a fast-changing global market.

The recent status of the trade discussions with China is a bit murky, and the White House has sent out some mixed signals. President Trump has suggested that the talks are indeed continuing, which China has refuted.