Treasury Secretary Scott Bessent has responded to China's 84% tariffs on US goods, the state of the Chinese economy, and the potential backup plans for corporate America are closed in light of tariffs.
Treasury Secretary Scott Bescent said Wednesday that there was no systemic problem in the bond market in his interpretation in the sector, and that abandoning the US Treasury department has warned China that it will cut China's cheaper currency targets.
Bessent appeared on Fox Business Network's Mornings With Maria and told host Maria Bartiromo that what's going on with Treasury bonds appears to be a normal derebalization and that he hopes market concerns about its activities will subside as the process arises.
“I've seen it a lot in my career in my market. These des are happening in the market right now. “We have a really big leverage player.
“I believe there's nothing systematic about this. I think what's going on in the bond market is unpleasant but normal deleverage. When I see the leverage drops, I think the risk manager is putting it on my shoulder and telling me to beat the book.
Scott Bescent blows up China's retaliatory tariff play as a loser move
Treasury Secretary Scott Bescent said he has not seen any systematic issues with deleveraging in the bond market. (Andrew Harnik/Getty Images)
Treasury yields have been shaky in recent weeks amid uncertainty over the Trump administration's tariff plans. March began at around 4.2% and peaked at around 4.4% later last month, then fell below 4% on Thursday and Friday following Trump's “liberation day” tariff announcement on April 2.
Bartiromo asked Bessent if the bond market is experiencing the issue of Delaveraging and if the Chinese government, the US Treasury's second largest foreign holder, has begun dumping bonds to put pressure on US financial markets.
“You know, Maria, if they abandon the Treasury, I think it's against their purpose because if they abandon the Treasury, they have to buy something else.
China imports increase US tariffs from 34% to 84%
The US and China are expanding tariffs imposed on imports between the two countries. (Brendan Smialowski/AFP/Getty Images)
The Treasury Secretary said China's efforts to reduce the relative value of the currency to support its large export markets are dynamics that it would be inappropriate to replace the US dollar as a global reserve currency because of its reliability.
“When I hear all these stories about the dollar not becoming a reserve currency, if I were to become a Chinese person willing to use currency as a trading tool, that doesn't look like a very good reserve asset to me,” Bescent said.
The US dollar has strengthened against the Chinese yuan in recent weeks, but has weakened against other major currencies, such as the Japanese yen and the Euro, the European Union's common currency.
European Union approves billions of retaliatory tariffs on US imports
Taxes are taxes on imports paid by import companies, and generally give consumers a higher cost at a higher price. (Sam Wolfe / Bloomberg Via / Getty Images)
Bessent believes these changes in the currency market are attributable to the economic situation and expectations of Europe and Japan. In particular, he noted that European NATO members planned to increase defence spending to counter Russia and Japan, thus promoting higher inflation expectations and higher interest rates.
“I want to repeat. The US has a strong dollar policy, some of which is overall. It's bilateral, the dollar-to-euro, the dollar-to-yen part,” he said.
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“Europeans are going to spend more on defense, so they will eventually upgrade to European fiscal spending, and I see President Trump's pressure on President Trump's military alliance as if to say “your fair distribution.” In Japan, Yen has become stronger, but that is the result of very strong Japanese economic growth.
