US DATA: New Home Sales Surprisingly Step Above Recent Ranges

Here is the text of Tsy Sec Bessent's speech at the IIF (link), which he is still delivering - there will be a discussion afterward.

• There is plenty on the US's role in the World Bank and IMF, and calling for those institutions to reform, while focus in the "trade" portion of the text is on China and Europe - see below for some of the key passages including on global trade imbalances and US security partnerships that reflect global economic relationships.
• Bessent: "China, in particular, is in need of a rebalancing. Recent data shows the Chinese economy tilting even further away from consumption toward manufacturing. China’s economic system, with growth driven by manufacturing exports, will continue to create even more serious imbalances with its trading partners if the status quo is allowed to continue.
• "China’s current economic model is built on exporting its way out of its economic troubles. It’s an unsustainable model that is not only harming China but the entire world. China needs to change. The country knows it needs to change. Everyone knows it needs to change. And we want to help it change—because we need rebalancing too. China can start by moving its economy away from export overcapacity, and toward supporting its own consumers and domestic demand. Such a shift would help with the global rebalancing that the world desperately needs.
  ....
  "Europe has already taken some long overdue initial steps that I applaud. These steps create a new source of global demand, and also involve Europe stepping up on the security front. I believe global economic relationships should come to reflect security partnerships.
• "Security partners are more likely to have compatible economies structured for mutually beneficial trade. If the United States continues offering security guarantees and open markets, then our allies must step up with stronger commitments to shared defense. The initial actions from Europe on increased fiscal and defense spending are proof that the Trump Administration’s policies are working."

The WSJ article identifying a potential change in the White House's approach on China is most notable for bringing up potential for a tiered, phased-in approach to tariffs on Chinese imports. In particular, "a tiered approach similar to the one proposed by the House committee on China late last year". 

• This is of course referring to a bill and not an executive order but it makes a certain amount of sense for the White House at this point, as it arguably reduces uncertainty for both Fed and businesses on the approach ahead (especially if it were codified as a bill), potentially avoids the worst of the near-term disruptions, and could provide a better roadmap toward the reshoring/supply chain restructuring the White House is looking for.
• Below are the details of the "Restoring Trade Fairness Act"  put forward last year by the House Select Committee on the Chinese Communist Party (link).
  • "The bill would end PNTR [Permanent Normal Trade Relations] for China. There would be no annual Congressional vote for recertification. It would codify tariffs in statute and create a new tariff column for China.
  • The new column would create a minimum 35% ad valorem (in proportion to the estimated value of the goods or transaction) tariff for non-strategic goods and a minimum 100% ad valorem tariff for all strategic goods.
  • Phase-in period: The new tariff column rates would be phased-in over five years with 10 percent of the tariff increase implemented in year one, 25 percent of the increase implemented in year two, 50 percent of the increase implemented in year four, and 100 percent of the increase implemented in year five.
  • Strategic Goods: Strategic goods are listed in the bill by HS code.
  • They are based on the Biden administration’s Advanced Technology Product List and China’s Made in China 2025 plan.
    The bill would end De Minimis treatment for covered nations (including China) and require customs brokers for other de minimis shipments.
  • It would provide tariff revenue to U.S. farmers and manufacturers injured by possible Chinese retaliation. Additional revenue would be used to purchase munitions vital to deterring CCP aggression in the Pacific."

These WSJ reports likely to raise the focus on Bessent's imminent appearance at the IIF in 4 minutes.

• He's set to be delivering keynote remarks and will "share his thoughts on the state of the global financial system". He will then hold a sit-down conversation with the IIF president. His remarks begin at 1000ET/1500BST and can be livestreamed here: https://vimeo.com/event/5054312/12805a306f
• His appearance follow closed-door remarks at an investor conference yesterday, where he supposedly said he sees de-escalation with China, with the current trade situation "unsustainable". Comments that will come into sharper focus given that WSJ report suggesting a "slashing" of import tariffs on Chinese goods - as well as a follow-up piece from the WSJ citing Bessent's influence in Trump deciding not to try to fire Powell.