US Treasury Secretary Scott Bessent sees 'big, beautiful' economic rebalancing with China

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US Treasury Secretary Scott Bessent on Tuesday said he is hopeful of a “big, beautiful” economic rebalancing with China after Washington and Beijing's trade talks in Geneva led to a temporary reduction of levies between the two economic superpowers.

The US-China trade talks in the Swiss city were “very constructive” with both parties bringing a clear agenda, shared interest and mutual respect, he said, speaking at the Saudi-US Investment Forum in Riyadh.

The two sides have established a mechanism to “prevent any misunderstandings” in future talks, he added.

He said US President Donald Trump and China's President Xi Jinping “have a very good relationship, but the relationship did not make its way down through other levels of government”. He added: “After this weekend, we have a mechanism to avoid escalation like we had before.”

Mr Trump's duties on many imports from China had risen to 145 per cent, while Beijing retaliated with levies of 125 per cent on US goods. Washington and Beijing on Monday agreed to lower tariffs by 115 per cent for 90 days, in a major de-escalation of Mr Trump's trade war.

The tariff levels were “the equivalent of an unintended embargo that is not healthy for the two largest economies in the world”, Mr Bessent said. “It is not healthy for the rest of the world.”

There is a possibility that “we could do a big, beautiful rebalancing” of economic ties with China and the “dream scenario” would be if the US and China could work together to unlock access to Chinese consumers, and China buys more American-made products, he said.

Asked if any areas of discussion are set aside during the 90-day pause of tariffs, Mr Bessent said “everything is on the table”.

The two countries have a “very good framework”, dating from a 2020 trade treaty signed during Mr Trump's first presidency to proceed with upcoming discussions, he said. “So we're not starting from ground zero. We have a framework and we can go from there.

“Both sides agreed we do not want a generalised decoupling between the two largest economies in the world,” he said. Instead, the US wants to “decouple” in strategic industries where it had become “woefully non-self-sufficient” such as medicine and semiconductors.

“The United States will bring those industries home,” he said. “But this isn't a generalised decoupling.”

Mr Bessent, who is focused on striking deals with Asia, said he also sees “productive” US trade talks with Asian countries.

"We have had productive discussions with Japan," he said. "Indonesia, which is a large trading partner, has been very forthcoming."

South Korea and Taiwan have also offered "very good proposals", he said. He also mentioned talks with Thailand.

"On my side of the world, things are going very well," he said.

However, the European Union has a “collective action problem” that is hindering trade negotiations with the US.

"The US and Europe may be going a bit slower," he said. “The Italians want something different than the French. But I'm sure at the end of the day, we will reach a satisfactory conclusion."

Trade between the US and EU totalled almost $1 trillion last year, according to the International Monetary Fund.

Mr Bessent's comments come on the heels of the signing of a US trade framework with the UK.

Trillions of dollars in idle capital

The Saudi-US Investment Forum was attended by top US industry executives including Larry Fink, the chief executive of asset management company BlackRock, Stephen Schwarzman, chief executive of asset manager Blackstone, and the chief executive of Citigroup, Jane Fraser.

Mr Fink said the current market volatility, sparked by the tariffs announcement, is deterring many investors from deploying capital, which is sitting idle in cash amid trade war concerns.

"We understand what the US is trying to do in terms of trying to reorder how trade is being done ... [but] the markets need certainty. In Europe, there's $12 trillion of money sitting in bank accounts, in the United States, there's $11 trillion sitting in money market funds. When there is that uncertainty you're going to keep more and more money in cash, and that's what we've witnessed," he said.

As a result of that uncertainty, some capital may be redirected into Middle East and Asian markets.

“We’ve seen modest reallocation out of the United States into other economies ... we are going to start seeing more and more money coming into this region over time, money going back into Asia, India, Japan," he said.

Ms Fraser said there are investment opportunities in new emerging industries, with innovation happening in life sciences, space and gaming.

"Volatility is the opportunity for those who get on the front foot and seize the moment,” she said.

Ms Fraser noted that there are economic opportunities in the kingdom that can be accessed by "unleashing the female entrepreneur”.

"I would say, 'keep going, ladies!'," she said.

Raising female economic participation in Saudi Arabia to 36 per cent in the last quarter of the year, up from 17 per cent, is a "serious structural change", the Saudi Finance Minister Mohammed Al Jadaan said.

Other major structural economic changes include raising the level of private investment as a percentage of the gross domestic product to 23 per cent currently, up from 16 per cent earlier, he said. Unemployment in the country reached record lows last quarter at 3.5 per cent, while the joblessness rate among Saudi nationals also reached its 2030 target of 7 per cent.

Investments in Saudi Arabia offer a “wealth of promising prospects” with attractive growth and healthy returns for companies, Saudi Investment Minister Khalid Al Falih said at the gathering. These sectors range from energy, mining infrastructure and renewables to transport, biotech, tourism, banking, AI and data storage.

"While energy remains a cornerstone of our relationship, the investments and business opportunities in the kingdom have expanded and multiplied many, many times over as a result of Vision 2030," he said.

"When Saudis and Americans join forces very good things happen, more often than not great things happen when those joint ventures happen.”