Markets in Asia rallied on Wednesday morning after Donald Trump suggested that tariffs on China cut be cut substantially and said he had no plans to dismiss Federal Reserve chairman Jerome Powell. Speaking to reporters in the White House on Tuesday night, the US president said he was confident that there would be a trade deal with China and that there would be no need for “hardball” negotiations.
“We’re going to be very nice. They’re going to be very nice, and we’ll see what happens. But ultimately, they have to make a deal, because otherwise they’re not going to be able to deal in the United States,” he said.
Trump said last week that Powell’s “termination” could not come fast enough after the federal reserve chairman suggested that the administration’s policies would suppress economic growth. But after days of turmoil on Wall Street following his comments, the president appeared to row them back on Tuesday.
“I have no intention of firing him,” he said.
“I would like to see him be a little more active in terms of his idea to lower interest rates.”
Trump imposed a 145 per cent tariff on Chinese imports this month and Beijing responded with a 125 per cent levy on all US imports, making trade between the world’s two biggest economies almost impossible. But Trump said that, even if China declined to negotiate a deal, he would impose a trading arrangement that would see the tariff on Chinese goods fall substantially from 145 per cent.
“It won’t be that high. It will come down substantially. But it won’t be zero. It used to be zero,” he said.
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Trump’s comments followed reports of a private briefing with investors during which US treasury secretary Scott Bessent said that the tariff war between China and the US was unsustainable for both sides. Bloomberg reported that Bessent described the current situation as an effective trade embargo, adding that Washington and Beijing would have to find a way to de-escalate it.
Bessent said that Washington’s goal was not to decouple from China and said tensions could cool during the coming months, even if a trade deal would take longer to negotiate. He suggested that a comprehensive trade deal could take two or three years to negotiate and would require a rebalancing of trade in favour of US manufacturing.
Beijing has not yet agreed to start negotiations with Washington over the tariff stand-off, although it has called for an agreement within the context of international trade rules. The US and China have sought to pressure third countries to take sides, with Washington pressing its partners to restrict trade with China and Beijing warning against any such action.
