Removing US Government’s Credit Risk Will Lower Interest Rates: Bessent

‘We have uprooted government waste and harmful regulations,’ the Treasury secretary said.

Treasury Secretary Scott Bessent speaks to reporters during a briefing at the White House on April 29, 2025. Travis Gillmore/The Epoch Times

Interest rates will come down if the Trump administration can remove the U.S. government’s credit risk, says Treasury Secretary Scott Bessent.

In a May 5 speech at the Milken Institute Global Conference, Bessent touted President Donald Trump’s economic agenda, saying it will deliver a “golden age economy.”

He espoused the White House’s trade policy changes, tax cuts, and deregulation efforts, saying they are “interlocking parts of an engine designed to drive long-term investment in the American economy.”

These efforts, Bessent says, will facilitate non-inflationary growth.

“We have uprooted government waste and harmful regulations. We have planted the seeds of private investment, and we have fertilized the ground with fresh tax legislation. Next, we harvest, and we want you to harvest with us,” he said.

Putting this altogether will result in an environment for stable interest rates, the Cabinet secretary noted.

“Why I am sitting here is to take away the credit risk of the U.S. government, then I think rates will naturally come down,” he said.

Bessent has previously stated that he and the president are focused on the 10-year Treasury yield, an all-encompassing benchmark affecting everything from mortgages to government financing.

The 10-year yield has come down after peaking at 4.8 percent in the middle of January. However, it has been volatile over the past month, trading between 3.9 percent and 4.49 percent.

The next four years present an opportunity for what he calls “reprivatizing the government, reprivatizing the U.S. economy.”

Reiterating his “Three Arrows” strategy from the 2024 election campaign, Bessent says the administration aims to decrease government borrowing and lower the deficit-to-GDP ratio to 3.5 percent from the current 7 percent.

“We’re decreasing the government in the economy at the same time we are right-sizing government spending and government employment,” Bessent said.

The administration has witnessed some fiscal improvement.

According to the Bureau of Economic Analysis, federal government consumption expenditures and gross investments fell by 0.33 percent in the first quarter.

In addition, the Treasury Department reported that the March budget deficit, which totaled $161 billion, was down by 32 percent from the previous year.

Over the past couple of years, the federal government’s fiscal health has come under the spotlight.

In August 2023, Fitch Ratings downgraded the U.S. government’s credit rating. Months later, Moody’s changed its outlook on the government’s ratings from “stable” to “negative.”

Both agencies listed various reasons, with one of the causes being the federal government’s fiscal picture.

“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that U.S. fiscal deficits will remain very large, significantly weakening debt affordability,” Moody’s said in a November 2023 report.

Last week, according to the White House’s discretionary budget framework, Trump proposed $163 billion in cuts for fiscal year 2026.

If enacted, this would represent a 23 percent reduction from fiscal year 2025.

Trade Deals Full Speed Ahead

Bessent’s public remarks come as the financial markets brace for potential trade announcements.

While Trump attempts to level the playing field in global commerce and reshuffle the international trade puzzle, Bessent said that “China is the biggest piece.”

“If we want more manufacturing, everyone agrees, except Chinese leadership, that they need more consumption,” Bessent said at the conference.

The president recently claimed that he has already struck 200 trade deals with unspecified countries.

Senior administration officials have said the White House has been close to reaching trade agreements with a lower number of countries.

Last week, in an interview with Fox Business host Larry Kudlow, Bessent stated that the administration was close to establishing trade pacts with “18 key trading relationships.”

“The president described them to the trade team as bespoke,” Bessent said. “Every deal is different, and he’s going to be involved, so I'll wait to hear from him.”

Commerce Secretary Howard Lutnick told CNBC on April 29 that the United States has a “done, done, done” trade deal with one foreign country that he did not name.

“I need to wait for their prime minister and their parliament to give its approval, which I expect shortly,” Lutnick said.

China, meanwhile, is not at the top of the priority list.

According to Bessent, the United States is prioritizing trade negotiations with 17 of the country’s 18 major trading partners.

“We put China to the side. Seventeen have not escalated; we are in negotiations with them. There’s a process in place,” Bessent said in an April 30 interview with Fox News’ “Hannity.”

He said that 100 countries approached the Trump administration and that now, U.S. officials are working with the top 17 to ensure they proceed as quickly as possible.

Last month, Trump imposed a 145 percent tariff on Chinese products, prompting retaliatory tariffs from China, which implemented 125 percent levies on U.S. goods entering the world’s second-largest economy.

In an interview broadcast on May 4, the president confirmed to NBC’s “Meet the Press” that he would not drop tariffs against the Chinese regime.

He also told reporters on board Air Force One that he is pursuing a “fair” trade agreement with Beijing.

Some trade deals “could very well be” unveiled this week, the president noted.

“We’re negotiating with many countries, but at the end of this, I’ll set my own deals because I set the deal, they don’t set the deal,” he said.

China’s Commerce Ministry said in a May 2 statement that officials are “currently evaluating” proposals submitted by the United States to start trade talks.

A flurry of economic and market data indicate that China’s economy is experiencing a sharp slowdown due to Trump’s tariff plans.

Ocean container bookings from China to the United States have plummeted, domestic factory activity has declined, and the economy has continually flirted with deflation amid lower domestic demand.

“The stalemate continues, but word has it both sides want to make an agreement before economic disaster happens,” Bob Lang, an analyst at trading firm Explosive Options, wrote in a note emailed to The Epoch Times.

“We may know more in the weeks ahead, but the news cycle is accelerating quickly.”