Treasury Secretary Scott Bessent commented on the Trump administration’s strategy for the “trade war” with China during an appearance at a CNBC event on Friday. “I think things can de-escalate; we don’t want to have to escalate,” he said. “We have things that are more powerful than the rare earth export controls that the Chinese want to put on. And to be clear, this is China versus the world-it’s not a U.S.-China problem.” “The good news is that this is IMF week. All my counterparts are here. We’re going to be speaking with our European allies, with Australia, with Canada, with India, and with the Asian democracies. We’re going to have a fulsome group response to this, because bureaucrats in China cannot manage the supply chain or the manufacturing process for the rest of the world.” “We have lots of levers we can pull that could be equally damaging,” he said, pointing to “aircraft engines” and “many, many minerals.” “They are a command and control economy, and they are going to neither command nor control us,” Bessent said. “We’re going to assert sovereignty-so are the Western allies.” Here’s the full conversation:

TREASURY SECRETARY BESSENT: Hopefully, we can get the Democrats to reopen [the government], and you know, we can get back off to the races. CNBC HOST: Interestingly, the market lately has been more concerned about trade, I think, than the government shutdown-especially this latest flare-up between the U.S. and China. So what happened from your point of view? Because I thought talks were going well, lines of communication were open. And then we learned about this rare earth mineral restriction from China, and now it’s back and forth and things are heating up again. BESSENT: They are. And the Chinese are trying to backfill the narrative-saying, Well, the U.S. did A, B, and C, therefore we had to do D. That’s not true. There was a lower-level trade person who was slightly unhinged here in August-I think his name is [Li Chenggang]-threatening that China would unleash chaos on the global system if the U.S. went ahead with our docking fees for Chinese ships. This is clearly something that they were planning all along. I think things can de-escalate; we don’t want to have to escalate. We have things that are more powerful than the rare earth export controls that the Chinese want to put on. And to be clear, this is China versus the world-it’s not a U.S.-China problem. The good news is that this is IMF week. All my counterparts are here. We’re going to be speaking with our European allies, with Australia, with Canada, with India, and with the Asian democracies. We’re going to have a fulsome group response to this, because bureaucrats in China cannot manage the supply chain or the manufacturing process for the rest of the world. CNBC HOST: What is a fulsome response? What does that mean? BESSENT: We have lots of levers that we can pull for our products that they need, that could be equally damaging. We don’t want to damage their economy, and we don’t believe they want to damage ours. But they are a command-and-control economy, and they are not going to command nor control us. We’re going to assert sovereignty-so are the Western allies. And part of this investment boom that we’re seeing is because President Trump wanted to reshore. Part of the reshoring is strategic. We don’t want to decouple with China, and I don’t believe they want to decouple-but this rare earth export control is a sign of decoupling. CNBC HOST: But we need them, don’t we? We need those rare earth minerals, don’t we? BESSENT: We do. CNBC HOST: I mean, that’s leverage they have on us. BESSENT: We have lots of leverage on them too, unfortunately. CNBC HOST: We have semiconductors, right? BESSENT: Aircraft engines, many, many minerals that are also important for their supply system. But you know what-we learned during COVID. COVID was a test run for what we’re seeing now in terms of bringing back strategic industries. We have this big investment boom, and I would say 10–20% of it is bringing back five to seven strategic industries that we need-whether it’s pharma, semiconductors, shipbuilding, steel, or rare earths. This rare earths problem was decades in the making. Every past administration should be ashamed. President Trump tried to solve it in his last term, and the environmentalists threw a fit. So here we are. But again, I’m optimistic. We are now communicating at very high levels. CNBC HOST: Right now? BESSENT: Right now. CNBC HOST: With your counterpart? I think there was a report today-there was an effort to get you with your counterpart in China, the vice premier. BESSENT: There have been many outreaches. And a good thing too-China has, as they always do, a large delegation everywhere. They have a large delegation here at IMF-World Bank week. CNBC HOST: So you’re meeting with them? BESSENT: There are working-level meetings. CNBC HOST: Okay. Is the Trump–Xi meeting still on? BESSENT: As far as I know, President Trump is still planning to go on with that. But you know, again, we’ll see. I think they have an excellent relationship. And the reason this didn’t really escalate is the level of trust between the two leaders. That’s an enduring part of U.S.-China relations-and everything else.

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