Countries Urged to Reach Consensus on 90-Day Tariff Suspension! U.S. Treasury Secretary Bessent: Communication with Walmart Established, No Need to Worry About Moody’s Credit Rating
U.S. Treasury Secretary Scott Bessent Warns Global Trade Partners
U.S. Treasury Secretary Scott Bessent, in an interview this morning on May 19, warned global trade partners that if an agreement is not reached within the 90-day tariff suspension period, the Trump administration would revert to the previous “reciprocal standard.” Regarding Trump’s earlier demand that Walmart absorb tariffs, as well as the issue of the three major U.S. credit rating agencies, Moody’s, downgrading the U.S. credit rating, Bessent stated that he has already spoken with Walmart’s CEO, asking them to absorb part of the tariffs, while some will be passed on to consumers. As for Moody’s downgrade, he believes it is not necessary to be concerned, as U.S. assets remain quite attractive.
Reach an Agreement During the 90-Day Tariff Suspension Period, or Revert to Previous “Reciprocal” Standards
Bessent emphasized:
“President Trump has called for sincerity in negotiations during the tariff suspension period. If the other side is unwilling, we will revert to the standards of April 2.”
Bessent also mentioned that there are currently 18 important trading partners prioritized for negotiations by the U.S., but he did not disclose the timeline for these negotiations.
Considering Regional Schemes for Latin America and Africa to Enhance Negotiation Flexibility
Bessent revealed that the U.S. is considering establishing regional tariff schemes for Latin America and Africa, which would mean:
“Directly setting an average regional tax rate.”
He emphasized that this would make negotiations more flexible and hopes to promote global trade stability without interfering with U.S. interests.
Notification Letters to Be Sent Within Two to Three Weeks to Inform Countries of Tariff Obligations
Last week, Trump publicly stated at a business roundtable in the UAE:
“About 150 countries around the world want to sign trade agreements with the U.S., but due to time and manpower limitations, we cannot negotiate with each country individually.”
He further pointed out that within the next two to three weeks, his financial team would send out notification letters informing countries:
“If you do not sign the agreement, this is how much tax you will have to pay.”
Tariffs on Chinese Goods Temporarily Reduced from 145% to 30%
On May 13, U.S. Trade Representative Jamieson Greer and Bessent reached a preliminary consensus with the Chinese trade delegation in Geneva:
U.S. tariffs on Chinese goods are temporarily reduced from 145% to 30%.
China will also reduce tariffs on U.S. goods from 125% to 10%. However, Bessent stated that this is only a temporary adjustment within the 90 days, and if no agreement is reached afterward, the tariffs may be raised again.
Bessent Addresses Concerns Over Policy Inconsistencies
In response to complaints from businesses regarding policy inconsistencies and unpredictability, Bessent explained that this is a deliberate strategy of “strategic ambiguity.” He stated:
“If we let the other side know too much, they will play us at the negotiation table. But ultimately, I believe that American consumers and workers will benefit from this.”
Walmart to Absorb Some Tariffs, Says Bessent
Many U.S. retailers relying on Chinese goods are concerned that if high tariffs are reinstated, they will face soaring costs and compressed profits. Recently, Walmart has publicly warned that prices on some products will increase as a result. Upon hearing this, Trump immediately stated:
“Walmart must absorb these tariffs together with China and should not pass the burden onto hard-working consumers!”
In response, Bessent stated that he has communicated with Walmart CEO Doug McMillon:
“Walmart will absorb part of the tariffs, while the remainder may be reflected in product prices.”
Moody’s Downgrades U.S. Credit Rating to Aa1; Bessent Not Concerned
In addition to tariff issues, warnings have emerged regarding U.S. finances. On May 16, Moody’s downgraded the U.S. sovereign credit rating from AAA to Aa1, citing:
The U.S. federal debt has reached $36 trillion and continues to rise rapidly.
One of the main reasons behind this is the ongoing Congressional debate over the budget proposal put forth by the White House.
The Committee for a Responsible Federal Budget (CRFB) estimates that if the latest tax cuts are extended for a full ten years, it could lead to an increase in the U.S. fiscal deficit by as much as $5.2 trillion.
In response, Bessent stated:
“U.S. assets remain attractive; we are not concerned about Moody’s downgrade.”
Credit Rating Downgrade May Increase U.S. Bond Yields, Affecting Mortgage and Corporate Loan Costs
Experts point out that after losing its top credit rating, the market may perceive an increased risk in lending to the U.S., which could push up U.S. bond yields. The 10-year U.S. Treasury yield serves as a reference benchmark for pricing global financial contracts, directly affecting mortgage rates and corporate loan costs. If these rates rise, it could place pressure on the economy.
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