'It's Not Going To End Well'—Former SEC Chair Gensler Says Chinese Are 'Tough Negotiators' Who Believe They Can Outwait US Policy Volatility

Former Securities and Exchange Commission Chair Gary Gensler says the trade fight between the U.S. and China is headed for trouble. “I think it’s going to be a bit of a quagmire,” Gensler said on CNBC’s “Squawk Box” last week in his first interview since leaving office.

China Plays the Long Game

Gensler, who negotiated with Chinese regulators during the Biden administration, warned that the U.S. needs to approach China with a combination of consistency, firmness and respect. “They’re tough negotiators,” he said. “They think time is on their side and that they can outwait the volatility of policy on the other side.”

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He believes that when China sees inconsistency in U.S. trade policy, it disengages. “They lean back and they don’t like to engage,” he said. “So that’s why consistency, respect, but yes, firmness is important.”

The Risk of Going It Alone

As Florida Republican Sen. Rick Scott (R-FL) pushes for Chinese companies to be delisted from U.S. exchanges, Gensler acknowledged previous bipartisan efforts to get China to follow U.S. market rules. But he warned against the current administration’s approach of pushing sweeping trade changes with many countries at once.

“Trying to do it with 150 or 200 countries and doing it so aggressively and so jarringly at one time is like a home field goal, a self-inflicted injury,” he said. “Allies are deeply important, but it’s not going to be that easy.”

He added that uncertainty is already making businesses cautious. “They’re pulling back. They have to be much more careful about their investments.”

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Concern Over Insider Trading in Government

When asked by CNBC’s Andrew Ross Sorkin about allegations of insider trading among government officials, including reports about Rep. Marjorie Taylor Greene (R-GA) buying and selling assets just before major tariff announcements, Gensler didn't name names but said the situation damages trust.

“I think it’s really critical that folks don’t trade on inside information, particularly those in Congress or the executive branch or the judiciary.”

He called for Congress to take a serious look at restricting members from trading individual stocks, noting that the SEC under his leadership had self-imposed such restrictions.

Gensler said that the SEC is now 20% smaller than it was in 2016, which makes it harder to police markets effectively.

“When you have that cop on the beat, markets work best,” he told CNBC. “Just like the highways, we do need traffic lights and we do need cops.”

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Skeptical of Most Crypto Tokens

Gensler remained wary of the crypto market, drawing a distinction between Bitcoin and the thousands of other tokens.

“This field is almost 99 or maybe one might say 100% sentiment and very little on fundamentals. Bitcoin may persist,” he told CNBC, comparing it to gold. But the other tokens? “Generally, those don’t end up well, and most then go down.”

Private Credit May Face Real Test

Finally, Gensler said the growing private credit market is a positive feature of U.S. finance, but not without risk.

“If we’re moving into that recession,” he said, “private credit will be tested in a way it hasn’t been tested recently.”

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