Bloomberg Audio Studios, Podcasts, radio news. Here's the latest this morning, the US and China agreeing to a ninety day cooling golf period, the US reducing its levies on Chinese imports from one hundred and forty five percent to thirty while China cuts duties on US goods from one hundred and twenty five percent to ten Joining US now to discuss the Treasury Secretary Scott Benson a driving force behind trade talks in Geneva over the weekend. Mister Secretary, welcome back
to Bloomberg. Survelland sir, it's good to see you.
Good afternoon from Geneva, Jonathan.
Greater catch up as always, sir. Let's get into these talks over the weekend. One standout line for me and for many others was the line that the differences between the two sides weren't as large as we thought they would be. What were those differences, sir, and why were they smaller than you expected?
Well, I think, Jonathan, what's important to know is for the tariff program, we had a plan, we had a process. We did not have a mechanism for engaging with the Chinese. So China was the only country who escalated their terriffs in response to our reciprocal tariff level. So that resulted in an unfortunate escalation. So we now have a mechanism to deal with that. Neither side wants a generalized decoupling.
The US is going to do a strategic decoupling in terms of the items that we discovered during COVID were of national security interest, whether it's semiconductor's, medicine, steel, So we still have generalized terraffs on some of those, but both sides agreed we do not want a generalized decoupling.
These things tay time. As you know, sir, we've got ninety days now to work with. Last time around, it took eighteen months to reach an agreement on purchase agreements. I think you yourself has said in the past that it can take two to three years to have a full comprehensive trade agreement with the country, between the US and China. What do you think is achievable, sir, over the next ninety days.
Well, Jonathan, we're going to see. But what has to happen is it has to be fair for the American people. But in January twenty twenty, President Trump produced a template we had an excellent trade agreement with China and the Biden administration chose not to enforce it. The Chinese delegation basically told us that once President Biden came into office, they just ignored their obligations. So we all already have
a large framework. The other thing to remember here, Jonathan, is that this is a pause down to ten percent. The April second level for China is thirty four percent, so we will be working to see where their final reciprocal number ends up. And the negotiations are a combination of tariffs, non tariff, trade barriers, currency manipulation, and subsidies of labor and capital.
Just to build on that, as I listened to you, do you consider the new levels as a ceiling or a flaw?
Well, it's obvious.
It's obviously a floor that they are now with everyone else who did not retaliate. So the levels have come down to the Palls level, and what I would say is thirty four which is their assigned April second level, would be a ceiling, which is what I went out and told people on April second, which.
Is why I was surprised.
Market participants panicked because we had kept We had kept the upside for every country and if they didn't retaliate. So this unfortunate turn of events happened because.
Of retaliation, but now we have the.
A process in place to avoid escalation like that.
Again, Secretary Beston, just to build on that, are you saying that tariff rates will only go up from here? If this really is a floor of ten percent on the Chinese side and thirty percent on the US side.
I'm not saying that they're going to go up, but it would be implausible that they would go below ten.
One thing that you've been talking about is generalized to coupling is something that's not necessarily in the interest of either side, and either side wants that.
What about a strategic to coupling.
What is the appropriate rate of tariffs that could potentially cause some sort of strategic to coupling in the sectors that you are talking about.
Well, look, bringing back our strategic are important. Strategic industries can be.
A result of terrorists, but it's also a result of national will. So this administration is running full speed to make sure that what we saw during COVID never happens again. So it's a combination of it can be terrorists, but again, it is the administration moving as quickly as possible to make sure that we are self sufficient in the strategic industries.
I think that's completely understandable from the United States side, and I want to miss the secretary whether the Chinese understood that. Did you get the sense they do understand that that will be the road forward for the United States.
Well, I think they understand that, and I think they understand that we are focused on fair trade, that this gigantic depth that we have with them, that it didn't happen last year, it didn't happen there before, It's happened over decades, and that this happened half excuse me, has to be remedied. The China shock gutted our manufacturing sector, and we want to bring that back.
On the other side.
Party chair she has said that he would like to increase consumption, but to date the Chinese have just increased manufacturing. So we would like to see them increase consumption. We would like to see them open their market to American products. So there are two ways to rebalance. One is fewer Chinese goods in.
The US market.
The other is more American goods in the Chinese market. And my guess is that the answer is somewhere in between.
Some of this, of course, takes us back to the purchase agreements of the first term of the president. Is it different this time around? Is it as simple as just revisit seeing those purchase agreements or do you say additional sectors being targeted?
Jonathan, I think everything's on the table. But the Phase one purchase agreements is a very good roadmap because I will point out that during twenty twenty China met their obligations under that agreement. It was only under President Biden where they neglected them. So we are getting we are starting there, and look, the world has changed. Products have changed, product mix has changed. So I think everything's on the table. But the main thing here is we have to have
a fair deal for the American people. And keep in mind too that we also have twenty percent finanyl terras on so we were at th for twenty twenty five. We have put on thirty percent terras. They have put on ten. And my economic observation is that businesses just need time to calibrate. That we saw approximately twenty percent
teriffs from President Trump's first term. Businesses calibrated, supply chains, moved We have seen twenty percent tariffs President Trump put on in February due to the fentanyl crisis calibration very little disruption, and now a ten percent additional tariff should mean very little disruption.
Mister Secretary, A lot of people are wondering what caused the softening and tone, the reason for both sides to come together and be able to have this kind of negotiation and try to pass forward where there will be further negotiations in the near term. What's your interpretation of what caused both sides to come to the table.
Well, I think that the two levels on the reciprocal tariffs, when they both ratcheted up to one twenty five, caused the equivalent of an embargo, and that wasn't good for either side. Where the depth is the country, so less bad for us. But I think there was the unintended consequence of this very fast ratchet, and so now both sides.
Are at ten.
We will be moving forward with a ninety day pause, and the important thing to remember is that we can always go back to the April second level. But my sense is we had very good discussions. My counterpart was the very firm but very engaged and I think we have set the stage for meaningful discussions.
Mister secretary, is there already a scheduled date for Jijian Ping and President Trump to meet in person at any point in the near term? Do you think that that is something in the cards as part of these negotiations.
I think that there would be a phone call before a meeting, and there's nothing on the calendar, but I could imagine that that could happen in the coming weeks or months.
Coming into the meeting. As you know, the President put out a social media post he referred to as Scotty b. I won't go there, We'll keep using, mister secretary, and he said, you could go as low as eighty. Can you share with us how we went from, say, eighty down to thirty. Where did that number come from?
Sir?
I think that in the President's mind, eighty was a number that did not cause an embargo, so we could still be at eighty and have trade flowing. But we were able to both the moved down by one hundred and fifteen percent. And Jonathan, I think the other important thing here is I think this is the first time that the Chinese have addressed one of the President's real priority, which is ending this fentanyl crisis in the United States.
So they brought their trade team and they brought a Vice Minister for State Security who met with our national security team. It was a separate meeting, and they had a very robust and detailed discussion on ways to stop the transport of precursor drugs from China to North America that ends up in the hands of the cartels that
is then killing several hundred thousand Americans a year. So I'm very optimistic that President Trump we have solved part of the fentanyl crisis by securing the border, and I think this is the next step on that. So if over the coming months we were to see excellent engagement from the Chinese and solutions towards solving the fentanyl crisis, I think we could see some amount of the ventanyl tariffs perhaps come off, but that is going to take actions from them.
What kind of action specifically, say, well, we can.
See where these precursor drugs are coming from from.
At Treasury.
Financial Criminal Enforcement Network has very good visibility into international finance. We can see these Chinese companies that are selling the equipment for making the pills, that transferring the precursor drugs to the cartels.
US Treasury has declared.
The Mexican cartels foreign terrorist organizations, so working with Chinese leadership to stop this would be a very tangible symbol. In China, the narcotics distribution is punishable by death, and we're not pushing for that necessarily, but we are pushing for very very strict enforcement, similar to what they do at home.
Mister Secretary, I imagine you're incredibly tired, and a lot of people were very excited to see you taking the lead in these discussions, certainly in the market. Are you going to be taking the lead going forward with other difficult negotiations around the world with different trading partners.
I've been involved in most of the Asia negotiations. We had a very good negotiation with Or, We've had two rounds of negotiations with Japan.
I've been involved with Korea.
I've met with the Vietnam and excuse me, also Indonesia. So my focus has been on the Asia region thus far. And then the trade team had a great victory with the UK putting together the contours of the first trade deal. The other thing I want to say too, is my partner here in Geneva and Best.
Her career was an incredible asset.
He has years of experience, a broad and deep knowledge of trade, negotiation, of.
The numbers and the nuance.
And we would not be here today without ambassador career.
Missus Secretary, just before you go, you've promised us a lot of time. We've used up most of it already. Just the final question, what does victory look like for you in six months time when we get to year end? And I know it's frustrated to you that we've only been talking about trade, that we haven't focused on the full policy platform. Where do you want to be by year end?
Well, well, Johnathan, this administration is doing peace deal, trade deal, tax deal. I try to state mostly as you know in my econ lane. So from that lane, victory to me looks like the three legged stool that really are the three parts of our program.
Really kicking in.
So we will have most of the trade and tariffs settled.
The tax bill is.
Moving along very well, better than I could have imagined. Speaker Johnson, leader Thun are doing an incredible job with President Trump's leadership. So we will have tax done and then the final piece that is longer lagged, but perhaps the most important is deregulation and deregulation. We are deregulating across all industries every day. President Trump is committed to for every new regulation, ten comes off the books. And deregulations should start kicking in in the third.
And the fourth quarters.
So tax, trade and deregulation all coming together at the end of the year. I think it's going to be very, very powerful for President Trump's economic agenda.
Mister Treasury Secretary Scope person, at your time, sir from Geneva. Very generous with your time.