Bessent Highlights China Ag Trade
Treasury Nominee Bessent Pledges to Press China on Ag Trade Commitments
OMAHA (DTN) -- President-elect Donald Trump's nominee for Treasury secretary on Thursday said one of his first actions if confirmed would be to demand China to fulfill its obligations for agricultural commodity purchases that were not enforced under the Biden administration.
Scott Bessent, a billionaire hedge fund manager from South Carolina, faced an array of questions in his confirmation hearing before the Senate Finance Committee. Republicans asked about the benefits and value of extending the 2017 Tax Cuts and Jobs Act (TCJA), while Democrats pointed out inequities in taxes and pressed Bessent over extending Trump's tax cuts for the wealthy.
Highlighting Trump's policies to cut taxes, cut spending and raise tariffs, Bessent said the next four years are a "generational opportunity" for a "new golden age" of the United States economy.
Senators delved into Trump's proposals for tariffs and how to deal with China. Sen. Todd Young, R-Ind., said he was concerned about the overuse of tariffs, adding that Indiana farmers bore the brunt of the 2018-19 tariff war. Young asked how Bessent would shield farmers from being impacted this time.
Bessent noted his family is involved in farming, including soybeans and corn. Bessent owns thousands of acres of farmland in North Dakota, for instance, that he has stated he will sell if confirmed.
"So, I'm very sensitive to this -- very up to date," he said. Bessent added, "The American farmers have been very loyal. Ninety percent of rural voters voted for President Trump, so they should know that their interests are his interests."
Bessent pointed out the Biden administration largely kept the Trump administration's tariffs on China, but Biden's team did not enforce the purchase provisions of the Chinese agreement. Known as the Phase I deal, China was expected to buy $40 billion a year in agricultural commodities. Chinese purchases increased, peaking at $38.1 billion in 2022, but have since fallen to $28.8 billion in 2023, and $22 billion for the first 11 months of 2024, a drop of 16% from the same stretch a year earlier.
Bessent said he would press China on this issue and potentially push for a "catch-up provision" to make up for the last four years.
"China has not made good on their ag purchases for four years," Bessent said. "If confirmed, next week I would start pushing for them to resume the purchases and then I would conference with President Trump on whether he believes there should be a makeup provision."
When asked about across-the-board versus targeted tariffs, Bessent said lawmakers and the American public should look at Trump's tariff strategy in three different ways. One, tariffs to remedy unfair practices by an industry, such as steel, or country, such as China. Two, more generalized tariffs will come as revenue raisers for the federal budget. Third, tariffs will be used for specific policy negotiations, potentially as an alternative to sanctions -- such as tariffs on Mexico over the fentanyl crisis.
"He believes we have gotten overuse out of sanctions and sanctions are driving countries out of the use of the U.S. dollar," Bessent said of Trump.
Sen Maria Cantwell, D-Wash., said tariffs increase prices on supply chains, farmers and consumers overall. Tariffs on Canadian oil, for instance, will raise gasoline prices. Then there would likely be retaliatory tariffs on farm products.
"I do think we are going to see retaliatory tariffs. We saw them in our state. It hurt us in our agriculture. And what happened is you lose more farms. I mean, there's a lot of people buying farmland. Goldman Sachs, Bill Gates -- there's a lot of people buying farmland, but we're losing farmers in the middle of the trade wars and that's a concern I have."
Bessent disputed Democrats' assertion that tariffs are a consumption tax. A 10% tariff across-the-board, Bessent said, would lead to roughly a 4% increase in the U.S. dollar compared to foreign currencies. Foreign manufacturers, Bessent said, would be forced to cut prices to keep their market share.
TAX CUTS
Bessent called for permanently extending the TCJA, which was Trump's signature legislation in his first term. The Congressional Budget Office has said extending the tax cuts for the next ten years would cost $4.6 trillion.
Without extending the tax cuts before the end of 2025, Bessent said the country would be "barreling towards an economic crisis" with $4 trillion in higher taxes. "We will see a gigantic middle-class tax increase," he said.
Sen. Ron Wyden, D-Oregon, ranking member of the committee, and other Democrats criticized the idea of giving more tax cuts to billionaires. Wyden said average Americans would be hit by tariffs as well.
"It feels to me like a class war on typical American families," Wyden said.
Democrats repeatedly pointed out the TCJA disproportionately benefited the top 5% of wealthy Americans. Bessent pushed back, saying the wealth increase for the bottom 50% of earners was three times higher than the wealth increases for the top 10% of Americans. Raising taxes for people making more than $400,000, $1 million or more would hurt small business owners, he said. Taxes on higher income levels would hurt "job creators," he said. He repeatedly said, tax cuts should be extended for all income levels.
"There is no income level that I don't think we should continue to the TCJA as it was," Bessent said.
ENERGY POLICY
Bessent disputed Wyden's take that the U.S. is in an "arms race for clean energy" against China and shifting away from policies to spur renewable energy were a mistake.
Bessent countered that China would build 100 new coal plants this year. "There is not a clean energy race. There is an energy race. China will build ten nuclear plants this year. That is not solar. I am in favor of new nuclear plants."
Bessent said the U.S. needs "energy dominance," adding one reason sanctions against countries such as Russia and Iran aren't effective as the U.S. isn't exporting enough oil to negatively affect those countries.
"As we can raise U.S. production, we can squeeze down the bad actors, especially Iran," Bessent said.
Bessent said the costs for one of Biden's signature clean-energy laws, the Inflation Reduction Act, are "way out of control." Republicans are looking to cut or claw back IRA provisions through a budget reconciliation bill this spring.
Senators, however, pointed to certain tax credits in the IRA law they want preserved. Sen. Roger Marshall, R-Kan., said the 45Z Clean Fuel Production Tax Credit is important in rural America, though Marshall told Bessent he wanted to make sure the credit was not going to Chinese companies exporting used cooking oil to the U.S. Also, Sen. Catherine Cortez Masto, D-Nev., raised the importance of the 45X tax credit, which she said is spurring mining for rare earth minerals in her state. Bessent agreed that mining for rare earth minerals is priority for the economy.
DEBT AND FED INDEPENDENCE
When it comes to spending cuts, Bessent said discretionary spending has gone through the roof and he wants to see the federal deficit, about $1.8 trillion in 2024, cut in half by 2028. Asked about the debt ceiling and impacts on Treasury, Bessent said, "The United States is not going to default on its debt if I'm confirmed."
Bessent pushed back on statements made by Trump that he wants more influence on the Federal Reserve and interest rate decisions made by the Federal Open Markets Committee (FOMC). Bessent said a Wall Street Journal article in which Trump claimed he wants more sway was "highly inaccurate." Bessent added, "of course" he believes the Fed should be independent and says it is inaccurate that Trump believes otherwise. "I believe on monetary policy decisions, the FOMC should be independent."
Trump's inauguration is Monday, Jan. 20, and at least some key members of his Cabinet are expected to see confirmation votes in the Senate that day.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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