Nominee for US treasury secretary suggests possible restart of trade talks with China


During his Senate confirmation hearing on Thursday, Scott Bessent, Donald Trump’s choice for US treasury secretary, signalled a willingness to resume trade negotiations with China and defended the president-elect’s tariff policy as a useful tool to gain leverage.

Bessent said that he would push China to buy American goods, indicating openness to a trade agreement like the “phase one” deal that the US and China reached in Trump’s first term.

He also said the US must ensure that the dollar remains “the world’s reserve currency”, while advocating for “rigorous screening” of outbound hi-tech investments and measures to secure supply chains to ensure an edge in America’s competition with China.

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“As a skilled negotiator, [Trump] believes that we’ve probably gotten over our skis on sanctions, and that sanctions may be driving countries out of the use of the US dollar. So the tariffs can be used for negotiations,” Bessent told the Senate Finance Committee.

Trump, who is to be sworn in on Monday, has long contended that tariffs can bring manufacturing and jobs back to America and help cut the federal deficit. During his election campaign, he advocated using tariff revenues to replace income taxes.

In 2018, Trump began imposing tariffs on more than US$300 billion worth of imported Chinese goods and pushed Beijing to sign an agreement, known as the phase-one deal, requiring it to buy an additional US$200 billion of American goods and services in a two-year period.

Trump often bragged that the deal was “the best” he had ever made. But after it was signed in January 2020, Beijing fell well short of the target, in part because the Covid-19 pandemic-related supply chain disruptions hampered exports.

Referring to the phase one deal, Bessent said that if confirmed, he would “begin pushing for the purchase guarantees that were in the China Agreement to be enforced, and perhaps to push the Chinese for a catch-up provision over the past four years.”

Chinese Vice-Premier Liu He and US President Donald Trump shake hands after signing the “phase one” trade agreement in the White House on January 15, 2020. Photo: Reuters

Additionally, Trump has said that on his first day in office, he would impose 10 per cent tariffs on all Chinese imports. He also said on the campaign trail they could reach 60 per cent or more for items like Beijing-subsidised electric vehicles that Trump said would cause a “bloodbath” in the US auto industry.

He also threatened to punish Brics nations with 100 per cent tariffs if they create a new currency; Russia and China have shown increasing interest in alternative currencies to the US dollar amid Western restrictions.

While some Democratic senators such as Ron Wyden of Oregon and Maggie Hassan of New Hampshire contended that Trump’s tariff plans could be inflationary and costly to US consumers and small businesses that rely on Chinese imports, Bessent argued that the tariffs would address China’s “unfair” trade practicises such as its manufacturing “overcapacity” and raise federal revenues.

Wyden, the committe’s senior Democrat, also questioned Trump’s plan to reverse outgoing President Joe Biden’s efforts to boost US competitiveness in the clean energy sector, a race China is leading.

Trump, a climate change sceptic, vowed to repeal the Inflation Reduction Act (IRA), Biden’s signature programme which pumped billions of dollars into domestic clean energy industries, and he is reportedly planning to issue an executive order shortly after his inauguration to boost fossil fuel.

“Our country is in a clean energy arms race with China and other powers. But unfortunately, these policies from Donald Trump and Republicans may prevent us from winning,” Wyden told Bessent.

But Bessent said the US was in a “energy race” with China instead of a “clean energy race”, citing new coal plants and nuclear power plants that China builds every year. He also called the IRA spending “wildly out of control”.

Bessent also called for more secure supply chains and a tightened screening process of outbound investments in China in chips, AI and quantum computing.

China and the US have been locked in a fierce battle in hi-tech. Washington has issued export controls prohibiting the sale of advanced semiconductors chips to China, and Beijing has retaliated by restricting sales to the US of critical minerals that are essential for chipmaking.

Chinese dominance in critical mineral supply chains also appears to be a top priority for the Trump administration to address, as Mike Waltz, Trump’s pick for national security adviser, disclosed on Tuesday.

Ron Wyden of Oregon, the senior Democrat on the Senate Finance Committee, speaking at Bessent’s confirmation hearing on Thursday. Photo: AP

As treasury secretary, Bessent would be in charge of enforcing sanctions and export controls – some of the most frequent trade tools Washington wields against Beijing – in response to threats to American economic security.

Bessent also faced intense questioning by Democratic senators on Thursday over Trump’s tax-cut proposals, with some saying they would benefit only the “ultra-wealthy” at the expense of the middle class.

Bessent pushed back, urging Congress to extend corporate tax cuts passed in Trump’s first term that are due to expire this year.

Trump also promised in his campaign to lower the corporate tax rate to 15 per cent from 21 per cent for companies manufacturing products in the US.

Studies have found that Trump’s tax and tariff policies could increase the burden on the US economy. An October report by the Committee for a Responsible Federal Budget, a Washington-based non-profit group, found that his fiscal proposals could increase the US budget deficit by up to US$15.15 trillion.

In September, the Tax Foundation, a Washington-based think tank, estimated the 10 per cent universal tariff and 60 per cent Chinese import tariff would reduce US GDP by roughly 0.8 per cent.

If China retaliated, it found, US GDP would fall by more than 0.2 per cent below the baseline by 2026 and inflation would rise by 0.6 percentage points in 2025.

Bessent, a billionaire hedge-fund manager with no experience in government, nonetheless received support from committee Republicans. Michael Crapo of Idaho, the committee chair, said that he would support Bessent’s nomination.

In a letter to the Treasury Department’s ethics office, Bessent, 62, indicated that, if confirmed, he would resign from Key Square Capital Management, the investment firm he co-founded, and divest its assets.

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