Xi Jinping Is 'Difficult To Deal' With, Says Scott Bessent, Calls China Most 'Imbalanced Economy' In Modern History - Toyota Motor (NYSE:TM), Taiwan Semiconductor (NYSE:TSM)

Editor’s Note: The story has been updated to reflect the correct Toyota Motors ticker.

Scott Bessent, the U.S. Treasury Secretary, shared his thoughts on China’s economy and the challenges it poses to the U.S.

China's ‘Unbalanced' Economy Poses Global Trade Risks

In an interview with Nikkei Asia, Bessent described Xi Jinping‘s economy as the most “unbalanced, or imbalanced, economy in the history of the modern world.” He noted that the Chinese government’s significant interest in the manufacturing sector has led to production below cost, effectively turning it into a jobs program.

China’s economic structure differs fundamentally from Western economies and Asian democracies. The country is unique in being both the largest economic and military rival to other nations. This makes it challenging to navigate relations with China, given its non-market economy and differing objectives. “It’s difficult to deal with it,” says Bessent.

Bessent warned that China’s increased production capacity during COVID-19 and its advancement in the value chain could be concerning for countries like Japan and South Korea. For instance, China’s significant lead in electric vehicles could pose a threat to companies like Toyota Motors TM if China decides to switch to hybrids.

Discussing the Trump administration’s economic policy, Bessent referred to it as a “three-legged stool” consisting of tax, trade, and deregulation. He stated that the tax leg was completed in record time, with the trade leg expected to be largely finished by the end of October. Deregulation, he added, is an ongoing process.

Trump Extends 10% Tariffs On China Amid Trade Talks

The imbalance in China’s economy has significant implications for global trade. Bessent described America’s reciprocal tariffs as a "melting ice cube," suggesting they could be reduced or eliminated if the nation’s trade deficit narrows. However, economists have dismissed this theory. Former Treasury Secretary Larry Summers questioned, "If the tariffs are not permanent, why will any business relocate a long-term facility to the U.S.?"

Despite the ongoing trade discussions, President Donald Trump extended the suspension of heightened tariffs on China for another 90 days, maintaining the current 10% reciprocal tariff until November 2025. This extension is aimed at facilitating ongoing discussions with China to address trade imbalances and unfair trade practices.

READ MORE: