Scott Bessent, the recently appointed US Treasury Secretary’s “smart money” took the stage in Washington last week. He issued a blistering attack on the International Monetary Fund (IMF) and the World Bank. He began to emphasize issues about the insular/operational focus of these institutions, some going so far as to say they have moved off mission. Bessent emphasized the need for reform, particularly as the United States seeks to strengthen its manufacturing sector in response to a rising China.
In his address, Bessent articulated a vision for deepening US engagement with the IMF and World Bank, despite his criticisms. As he put it, America will have to take a “muscular approach” to the global economy. This will be all the more important as China increases its level of consumption. “America first does not mean America alone,” he stated, underscoring his belief in the importance of collaboration among trade partners.
Criticism of IMF and World Bank Operations
Bessent’s comments provided a sobering picture of organizations that have strayed far from their intended primary missions. He went on to vigorously state that the IMF has “suffered from mission creep.” Rather than focusing their attention on fiscal responsibility and economic development, they are wasting time and taxpayer dollars pushing unrelated priorities like combatting climate change and promoting gender equity. His remarks are indicative of a broader stance taken by the Trump administration. They want to stamp out the progressive ideology that they perceive has seeped into our federal institutions.
His words resonated deeply with development bankers and analysts alike. Yet for some time, they have been on guard against this evolving role of the international monetary beasts. Bessent’s support for the IMF came as a huge, positive surprise. It was key to preserving international financial stability because of the precedent that it would set. He reiterated the importance of these institutions, stating that they “serve critical roles in the international system.” The Trump administration is eager to work with them so long as they can stay true to their missions.
Opportunities for US-China Relations
Bessent touted the opportunities from a big new US/China trade deal. He highlighted that getting there would require de-escalating the current, longstanding trade war. He made clear that both countries would benefit tremendously from cooperating. This all depends on Beijing doubling down on missions set in stone.
The debate on tariffs makes these good faith diplomatic overtures all the more difficult. President Donald Trump mentioned on Tuesday that the current 145% tariffs on China could “come down substantially,” while Karoline Leavitt stated firmly that “there will be no unilateral reduction in tariffs against China.” As both sides seek to understand one another’s agendas, this tension has come to symbolize the uncertainty that looms over any future trade negotiations.
Political Landscape and Future Implications
For geopolitical and electoral reasons, the context of international economic policy is contentious. Jay Shambaugh alluded to a Project 2025 proposal that may advocate for a withdrawal from the IMF and World Bank should Trump win the 2024 election. Adopting such a proposal would have enormous implications, for better or worse, on America’s leadership position in global finance and development.
Beijing has, as predicted, doggedly pushed back against these pressures. They think pressure is a lousy strategy for dealing with China. As the Chinese government argues, constructive dialogue is key to enhancing mutual understanding and cooperation. Bessent’s comments convey an enthusiasm to collaborate in a more meaningful way. This position is a sharp contrast to the more combative postures of other federal actors in D.C.
Leave a Reply