In a closed-door speech for JPMorgan Chase, U.S. Treasury Secretary Scott Bessent warned that the escalating trade war with China is “unsustainable” and expects a “de-escalation” between the two global economic giants. Although formal negotiations have yet to begin, Bessent emphasized that both sides recognize the current tariff-heavy stance can’t continue indefinitely.

President Donald Trump imposed a sweeping 145% tariff on Chinese imports, prompting China to retaliate with 125% tariffs on U.S. goods. The aggressive tariffs, applied to multiple countries, have caused market volatility, rising interest rates, and heightened investor concerns over inflation and sluggish growth.

Despite the tough rhetoric, Trump struck a softer tone in public, stating, “We’re doing fine with China,” and that he intends to be “very nice” to President Xi Jinping. He added that the final tariff rate would be “substantially” lower than the current level, suggesting a willingness to compromise.

Meanwhile, Trump continued pressuring the Federal Reserve to cut interest rates, arguing that inflation is no longer a concern. Although Fed Chair Jerome Powell has maintained independence, he recently warned that Trump’s tariffs are likely to hurt the U.S. economy by increasing inflation and slowing growth.

Trump has denied any immediate intention to fire Powell but has repeatedly criticized him on social media, saying, “Powell’s termination cannot come fast enough!” Despite this, the Fed has held rates steady at 4.33%, awaiting clarity on the broader economic impact of ongoing trade tensions.

As global uncertainty mounts, both the administration and financial markets are watching closely for any signs of meaningful progress in U.S.-China trade talks.