Scott Bessent, the US Secretary of the Treasury, emphasized in an interview with Japanese media that the tariff policy of the Trump administration aims to promote the reshoring of manufacturing, reduce the record-high trade deficit, and use it as a bargaining chip in diplomatic negotiations. He also issued a strong warning about the economic structure of China, calling it the “most imbalanced economic entity in modern history”.
In a report published by Nikkei Asia on Monday, Bessent made the aforementioned remarks. He criticized Beijing for expanding production capacity during the pandemic and dumping products globally at below-cost prices, pointing out that this industrial model poses a threat to Asia.
Bessent also mentioned the “Golden Industrial Partnership” between the US and Japan, revealing that the US expects to complete most of the trade agreements, including the crucial US-China negotiations, by the end of October.
He stated that reciprocal tariffs are part of the “three pillars” of the economic policy of the Trump administration, alongside tax cuts and deregulation.
The primary aim of using tariffs, according to Bessent, is to “rebalance” the trade deficit, which reached $1.18 trillion in 2024, the highest among all major countries.
He described the tariffs as, “tariffs should be a melting ice cube over time,” implying that if manufacturing reshoring and trade imbalances improve, reciprocal tariffs could gradually decrease or be eliminated.
“If production returns to the US, our imports will decrease, thus achieving a rebalance,” he said.
Bessent pointed out that Japan has a high savings rate, while the US has a high consumption rate, highlighting the need for both sides to adjust their economic structures. He suggested that in Japan, there might be an increase in consumption, while in the US, there could be more emphasis on manufacturing.
Bessent is a key official in the Trump administration leading tariff trade negotiations. He anticipates that the negotiations will be “largely completed by the end of October,” with the US-China talks being the most critical.
Dealing with China is “very difficult,” according to Bessent, because “it is a non-market economy, and the goals of non-market economies differ from market economies compared to other countries.”
He expressed high alertness regarding China’s excess production capacity and the mass export of products at extremely low prices globally, stating, “We believe that much of this production is below cost. It’s an employment plan, they prioritize employment and production targets over profit goals.”
Bessent also warned that Beijing’s economic policies could threaten Asian economies like Japan and South Korea.
“If I were an official in Japan or South Korea, I would be concerned about China expanding production capacity during the pandemic and moving upstream in the value chain. For example, in the automotive sector, China excels in electric vehicles, while Toyota is strong in hybrid technology. If China shifts towards hybrids, coupled with their emphasis on employment and production targets rather than profit goals, this is worrisome,” Bessent said.
Regarding the economic agreement with Japan, Bessent stated that Tokyo has agreed to accept a 15% tariff and pledged to establish a $550 billion investment and loan program, aiming to create a “Golden Industrial Partnership” between the US and Japan.
He said, “The Japanese government has proposed a very good plan, and I believe over time, we will achieve a balance. I don’t know if it can be reached before the end of President Trump’s term, but I can say we will make significant progress.”
“Economic security is national security,” Bessent stated. “This Golden Industrial Partnership will further align US and Japanese interests on various levels, becoming a core of growth and security in the two countries’ relationship.”
He also urged Japan to change policies and expand domestic demand, rather than relying on exports.
In the agreement, Japan requested a reduction in the automobile tariff from 27.5% to 15%, leading to delays in implementation.
According to Bessent, it took about 50 days to finalize the UK agreement. In light of this, the US-Japan agreement was announced on July 22 on the US East Coast, with the new Japanese automobile tariff expected to take effect in mid-September.
Regarding US dollar policy, Bessent stated that a “strong dollar” does not refer to the exchange rate prices on market screens, which are determined by the market relative to other currencies.
He explained that the core of a “strong dollar” policy is to “develop policies that can sustain the dollar’s status as a reserve currency. If we have good economic policies, the dollar will naturally be strong.”
Over the past few decades, the US has primarily used funds from trade deficits to purchase financial assets, including government bonds, private equity funds, or the “FANG” technology stocks. Now, the government is working to attract more foreign direct investment, making the US not only a hub for financial investments but also the most attractive location for manufacturing.
Bessent also mentioned that the “Tax Cuts and Jobs Act of 2017” has been made permanent, implementing the largest spending cuts in history, reaching $1.4 trillion to $1.5 trillion. He emphasized that the US is aiming for energy dominance, predictable regulations, and reduced regulations to improve the investment environment and maintain the dominance of the US dollar.
Current Federal Reserve Chairman Jerome Powell’s term will expire in May next year, and President Trump has started the process of selecting a new chairman.
When asked about the qualifications the next chairman should possess, Bessent stated that they must be “someone who can gain market trust and has the ability to analyze complex economic data.”
He added that the Federal Open Market Committee (FOMC) is composed of 12 members, and the chairman must be able to manage the committee and build consensus.
The next chairman should also “focus on forward-thinking and not rely solely on historical data,” according to Bessent.
Expressing concern about the current situation, Bessent said, “I am worried that monetary independence is being compromised. Monetary independence is crucial for the smooth operation of the economy and inflation expectations. I am worried that the Federal Reserve is getting involved in too many other areas, threatening its independence. Therefore, the new chairman must be able to examine the entire institution.”
When asked about President Trump’s repeated calls for the Federal Reserve to cut interest rates quickly, Bessent replied, “President Trump will express his opinion, and Senator Elizabeth Warren will express hers, but ultimately, the Federal Reserve is independent.”