Bessent Defends Trump Economic Policies, Plans China Meeting

US Treasury Secretary Scott Bessent mounted a broad defence of the Trump administration's economic policies before the House Financial Services Committee on Tuesday, covering currency interventions, bond market operations and artificial intelligence safety, while revealing plans to meet his Chinese counterpart this weekend.

Bessent said President Donald Trump and Chinese President Xi Jinping would continue discussions next week on Iran and China's financial ties to Tehran. Washington has been working to cut Iran off from Western financial systems as the Iran war enters its seventh month.

Although the hearing was formally about the international finance system, including reforms to the International Monetary Fund and the World Bank, lawmakers focused on financial markets, the economy and measures against Iran. Several protesters rose in succession to demand an end to sanctions on Iran and the war, interrupting Bessent's opening statement before being removed.

Speaking to reporters before the hearing, Bessent attributed rising bond yields to "global issues." The 10-year Treasury yield reached levels not seen since 2007 during a worldwide bond selloff affecting most major economies. Analysts link the increase to higher oil prices, expectations that the Federal Reserve will raise rates this week, competition for capital from AI spending and concerns about the US fiscal path. Bessent acknowledged the yield rise reflected "the need to address the deficit."

He said the Treasury's decision to double the size of longer-term debt buybacks had succeeded in limiting yield increases and underscored US credibility, pointing to two of the most successful Treasury auctions in two decades. He also said the US bond market has been the best-performing in the developed world since Trump took office.

Bessent defended the Treasury's joint intervention with Japan to support the yen, saying the US bought a "nominal amount" to signal backing for Japanese policy and earned tens of millions of dollars in the process. A stronger yen, he said, benefits American exports and reduces the need for Japan to sell US assets to fund intervention.

On the economy, Bessent blamed inflation on the previous Biden administration and said Americans are better off under Trump. He cited Census Bureau data showing the poverty rate fell 0.5 percentage point last year to a record low of 10.2%, with 34.5 million Americans in poverty, while median household income rose 2.6% to a record $87,460. Asked about Trump's proposal to pay each American $5,000 if Republicans keep congressional majorities in November, Bessent said he would work with House Speaker Mike Johnson to make the payments happen if congressional approval is needed.

Bessent said the dollar's strength reflects the administration's credibility, describing it as "a set of behaviors" rather than a price on a screen, and credited regulatory, tax, trade and energy certainty with drawing trillions of dollars into the US.

On AI safety, Democrats raised concerns after Anthropic CEO Dario Amodei called for slowing the pace of AI development, sentiments echoed by OpenAI CEO Sam Altman and Elon Musk of xAI. Bessent said the Treasury has worked on safety continuously since the release of the Mythos model earlier this year, coordinating with banks to share patches for software vulnerabilities exposed by the Anthropic model. He said the administration required Anthropic to withdraw a model for safety checks and argued AI labs should be liable for their creations, while stressing the importance of staying ahead of China. "I can tell you what we shouldn't do on safety is to give these labs a liability exemption," he said.