Key Points at a Glance:

  • U.S. Treasury Secretary Scott Bessent said Wednesday he sees the possibility of reaching a comprehensive agreement with China to end the trade war. China currently faces the highest tariffs among dozens of U.S. trading partners.
  • "There is an opportunity here for a grand bargain," Bessent said in response to questions after a speech in Washington. "It's an incredible opportunity."
  • Bessent said President Donald Trump aims to revitalize American manufacturing and correct global trade and financial imbalances, hoping to push Beijing toward an economic model driven more by domestic consumption and less by exports and manufacturing investment. "Sometimes it takes an external push," he added, referring to Trump's announcement this month of a 145% tariff on goods imported from China.

In-Depth Analysis:

Bessent noted the prospect of such a settlement as Trump has shown flexibility in the trade dispute with China, the world's second-largest economy after the United States.

"Tariffs will come down substantially, but they won't go to zero," Trump said Tuesday, adding he saw no need to "be tough" on Chinese leader Xi Jinping. "We're going to be very good to China," he said, predicting "they'll be happy."

Bessent said the United States wants China to provide a timeline and make measurable progress in fundamentally shifting its economy toward consumption-driven growth. Such a shift would stimulate demand for U.S. exports and narrow the trade deficit between the two countries.

"We want to see results, we want to see timelines," Bessent said. He said after the speech that the Trump administration has not proactively offered to unilaterally reduce import tariffs on Chinese goods, according to Bloomberg.

The United States has urged Beijing to narrow the bilateral trade deficit by stimulating domestic consumption since at least 2006. That goal also motivated the creation of the U.S.-China Strategic Economic Dialogue in that year under then-Treasury Secretary Hank Paulson.

Bessent said Wednesday that Beijing is moving away from that goal.

"The latest data show China's economy is moving further away from consumption and toward manufacturing," Bessent said. "If the status quo is allowed to persist, China's manufacturing-export-driven growth system will continue to create more severe imbalances with its trading partners."

Bessent said that instead of boosting domestic demand, Beijing is trying to overcome economic challenges by exporting excess manufactured goods, an "unsustainable" approach that harms both China and the entire world.

"China needs to change. China knows it needs to change. Everyone knows it needs to change," Bessent said. "We want to help it change—because we also need to rebalance," he said, noting the need to reduce U.S. borrowing and federal debt.

The economic risks from Trump's tariffs, which target nearly all U.S. trading partners as well as China, are rising.

The International Monetary Fund (IMF) on Tuesday cut its U.S. economic growth forecast for this year to 1.8% from 2.7% in January, citing the global trade conflict.

The IMF said the global economy could grow 2.8% in 2025, half a percentage point lower than its January forecast.

Economists at a growing number of institutions, including JPMorgan Chase and Citigroup, predict Trump's trade war will push the United States into a recession.

The Peterson Institute for International Economics sees a 65% probability of a U.S. recession within the next 12 months.