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Wall Street stocks rallied and oil prices climbed on Tuesday as the US Treasury secretary said a trade war with China was “unsustainable”.
Scott Bessent told investors at a conference hosted by JPMorgan that he expected the two countries would reach a deal at some point, said people familiar with his comments.
He said the high tariffs the US and China have imposed on each other’s imports amounted to what were in effect trade embargoes and added the status quo was “unsustainable”. Bessent also said President Donald Trump was not trying to decouple from China.
Trump has imposed a 145 per cent tariff on goods from China, while Beijing has responded with retaliatory tariffs that total 125 per cent.
Stocks, which had opened higher following a sell-off in the previous session, climbed further on Bessent’s comments, which were first reported by Bloomberg, though they gave up some gains in afternoon trading.
The blue-chip S&P 500, which has lost more than 10 per cent this year, closed 2.5 per cent higher on Tuesday, while the tech-heavy Nasdaq Composite added 2.7 per cent. Both indices fell sharply on Monday on fears the president might fire Federal Reserve chair Jay Powell.
The US Dollar index, which tracks the currency against a basket of six international peers, rose 0.7 per cent. In government debt markets, the 10-year and 30-year Treasury yields fell modestly as inflation expectations receded. Bond yields move inversely to prices.
In commodity markets, Brent crude, the international oil benchmark, rose 1.5 per cent to $67.27 a barrel on hopes that the worst aspects of a global trade war might be avoided.
Gold, a haven asset that hit a record $3,500 a troy ounce earlier on Tuesday, retreated 1.4 per cent to $3,375.
Earlier in the day John Paulson, the billionaire hedge fund manager and Trump supporter, struck a $1bn deal alongside Novagold Resources for an Alaska gold project.
“The general level of uncertainty, both economically and politically, is driving the price of gold,” Paulson told the Financial Times.
“I think this trend will continue, that gold will become the alternative reserve currency,” he added. “And it’s not just among central banks, but also for private individuals, which don’t want to face the risk of confiscation, currency controls or devaluation given inflation.”
Although Bessent expressed optimism that a deal with China would be reached at some point, he cautioned there were no diplomatic negotiations between the countries to end the trade war.
However, two people familiar with his remarks said there were no signs Beijing and Washington were anywhere close to finding a solution and markets were reading too much into his comments.
One person said it was unclear if Trump agreed with his Treasury secretary. The White House and Treasury did not reply to requests for comment.
Asked about the comments at a White House press briefing, Karoline Leavitt, the press secretary, said Trump believed the US was “doing very well in respect to a potential trade deal with China”.
But people familiar with the situation in Washington and Beijing stressed there were no talks between the capitals on resolving the dispute. China has made clear to the White House that it views its approach on tariffs as a form of bullying and will not capitulate.
“This is all messaging to hold the markets together while these negotiations are ongoing,” said Steven Blitz, chief US economist at TS Lombard. “Bessent is stating an obvious fact.”
