IIF KEYNOTE REMARKS FROM TREASURY SECRETARY BESSENT
For questions on the note below, please contact the Delta Strategy Group team.
On April 23, Treasury Secretary Bessent delivered keynote remarks and commentary on questions from Tim Adams, hosted by the Institute of International Finance (IIF). Secretary Bessent’s written statement is available here, and video coverage is available here.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- Secretary Bessent discussed how the international financial system is marked by deep imbalances and called for renewed global coordination through the IMF and World Bank. He emphasized that economic security is national security and restoring these institutions to their founding missions will build stronger, more resilient economies. He highlighted that “America First” does not mean America alone but signals a call for increased U.S. leadership and collaboration in international institutions alongside mutual respect in trade relations.
- Secretary Bessent criticized the IMF for “mission creep” and argued it must return to its core functions of monetary cooperation, macroeconomic stability, and balance-of-payments support. He called for IMF to be a “brutal truth-teller”, highlighting the need to hold surplus countries like China accountable for currency manipulation and unsustainable lending practices.
- Secretary Bessent outlined three primary causes of the U.S. trade deficit: distorted trade practices by other countries, U.S. fiscal deficits, and the strength of the dollar. He outlined that more than 100 countries have engaged with the U.S. following tariff actions, expressing willingness to support fairer trade and global rebalancing.
- Secretary Bessent stated that the U.S. must return to a sustainable budget deficit. He emphasized that the U.S. has a spending, not a revenue problem. While acknowledging that global use of the dollar may decline, he said he expects the dollar to remain the world’s reserve currency for the foreseeable future.
- Secretary Bessent underscored that China’s export-led model is unsustainable and contributes to global distortions, urging China to rebalance toward domestic consumption.
- Secretary Bessent identified the growth of private credit outside regulated frameworks as a symptom of overregulation from the post-2008 era, calling for either deregulating banks or enabling them to lend more effectively in a safe and sound manner. He voiced support for a financial regulatory framework that unleashes innovation, rebalances growth between Wall Street and Main Street, and avoids overreactions to past crises.
- Secretary Bessent supported an “all-of-the-above” energy strategy for World Bank investments, prioritizing affordable, reliable, and baseload power such as fossil fuels and nuclear energy, especially in emerging markets.
Q&A
Adams: Is your ask simply getting back to factory settings, with a focused approach to deal with the issues you see as most paramount? Bessent: Yes. As I said in my confirmation hearings, I believe U.S. engagement with international financial multilateral institutions is essential. We should engage and be in it to win it for the American people, for other countries, and for the client countries.
Adams: Twenty years ago, a senior U.S. Treasury official gave a speech stating that the IMF was asleep at the wheel in dealing with imbalances. How will you do this differently, and how do you plan to proceed with this approach? Bessent: Our moves thus far toward reordering the financial or trading system are a start. Today, as I reaffirm our engagement, I am also setting out a list of core principles and a back-to-basics approach for the institutions. Coming from the private sector, we want to see results and timelines. Global rebalancing has been a topic for more than twenty years, and some countries may have one-hundred-year perspective that we do not.
Adams: China is obviously an important part of this administration’s foreign and economic policy in meeting with your Chinese counterparts. What will you tell them regarding their awareness of the huge imbalances, particularly in their manufacturing capacity, especially in areas like automobiles? How will you help them understand that it is not just about talking, but about executing on these issues? Bessent: I believe they understand very well; it is just a matter of impetus and will. Our Chinese counterparts have, in the past, come to the realization that change is needed and have implemented it very quickly. Alternatively, there is an opportunity here for a major agreement. The U.S. is looking to rebalance toward more manufacturing, which implies an identity shift toward less consumption. If China is serious about reducing its dependence on export-driven manufacturing growth and rebalancing toward a domestic economy, or “dual circulation,” as right now it is more like singular circulation, let us do it together.
Adams: How important is it to address our fiscal imbalance, especially considering we are running six percent of GDP at the top of the cycle, as part of the larger effort to rebalance the economy? Bessent: It is very important that people understand a trade deficit stems from three key factors: first, external trade policies which include tariffs, non-tariff barriers, currency manipulation, and the state subsidy of labor and means of production; second, the larger our deficit, the more demand it creates and the more it pushes up interest rates; third, the strength of the dollar. The U.S. continues to maintain a strong dollar policy, and the dollar will adjust based on market forces. A strong dollar means having the right policies in place to deserve capital flows and to inspire confidence and also varies depending on bilateral exchange rates. The U.S. does not have a revenue problem; we have a spending problem. We need to return to a long-term sustainable budget deficit, something with a ‘three’ in front of it, which is workable. We are projecting two percent inflation and 1.8 percent growth, though growth could be much higher if we implement our economic policies.
Adams: Do you view the U.S. dollar’s role as the global reserve currency as an exorbitant privilege? Bessent: The fact that the U.S. sits at the center of the global economy is enabled using the dollar. It is natural that dollar usage may decline over time, but I believe the U.S. will remain the world’s reserve currency for my lifetime. Reaffirming our commitment to these international institutions is also a key part of that.
Adams: Do you think this is an opportunity to shift some of the demand the world has relied on from U.S. final demand to Europe? Is this a positive time for Europe? Bessent: We should all congratulate President Trump on how he is accomplishing what a succession of European leaders have tried to do over the past twenty size years, since the advent of the euro, to increase its fiscal spending and help drive the European economy. I applaud these nascent efforts because they represent a combination of economic stimulus alongside burden-sharing on the European continent for defense.
Adams: What would you like to hear over the next couple of days from international organizations regarding your “back to factory settings” approach? Bessent: There has been significant mission creep at the World Bank and IMF, and they must get back to the basics on priorities and how we judge success.
Adams: You discussed international bodies graduating countries that should have graduated some time ago. How does that change the approach moving forward? Bessent: As President Trump says, it is common sense that you cannot have the second-largest economy in the world and be considered a “developing country”. China is an adult economy.
Adams: What more do we need to do regarding energy production, and how can the World Bank do more to encourage fossil fuels as well as nuclear energy, assuming a diversified energy approach? Bessent: We need to drive the right combination in terms of sustainable production. We have seen that intermittency does not work, even in middle-income countries. Our goal should be to build a model with strong baseload capacity and then bolt on alternative production, rather than starting with alternative production and ending up with latency or intermittency that makes industrialization impossible.
Adams: What is your vision for financial regulation in the U.S., and what do you want the industry to look like? How should we encourage the U.S. capital markets? Bessent: I have been getting a lot of questions on private credit, and it is an interesting addition to the U.S. financial mosaic. It is the depth and breadth of our capital and credit markets that power the U.S. economy, and it is the innovation within those markets that drives that power. Private credit is a very new and interesting part of the landscape, but it is developing outside of the regulated ecosystem and that is a distortion of the system. It suggests to me that the post-2008 regulatory corset is too tight on regulated institutions. We need to either deregulate them or enable them to better provide lending opportunities to the American and the international economies in a smart, safe, and sound way. History shows us that financial crises often trigger regulatory overreactions, and I believe we had such an overreaction. Through partnership with the three U.S. banking regulators, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC, we can create a system that allows our economy to prosper again. What sets the U.S. apart from most other G7 countries is the number and diversity of financial institutions we have. In the U.S., community and small banks provide seventy percent of agricultural lending, forty percent of small business lending, and forty percent of real estate lending. We have seen an incredible boom on Wall Street and Wall Street can continue to do well, but it is Main Street’s turn to share in that prosperity. The post-GFC pullback by small banks contributed to stagnation on Main Street, and we are determined to fix that.