IMF & World Bank need reforms, stresses US Treasury Secretary

Treasury Secretary Scott Bessent levelled harsh criticism against the operations of the World Bank and the International Monetary Fund even as he tried to reassure nervous investors that the United States would maintain its global leadership role. “America first does not mean America alone,” he said in a speech to the Institute of International Finance, where he also promised support for the multilateral banks' core missions.

"To the contrary, it is a call for deeper collaboration and mutual respect among trade partners.”

Although Bessent said the IMF and the World Bank are “falling short,” he did not call for the US to withdraw from the institutions, as some conservatives had advocated in a Project 2025 proposal created by the Heritage Foundation. He said the institutions “serve critical roles in the international system. And the Trump administration is eager to work with them — so long as they can stay true to their missions.”

It was the latest example of how Bessent, a former hedge fund manager who keeps a close eye on the financial markets, has tried to calm the economic turmoil as President Donald Trump tries to rewire international trade through aggressive tariffs. But his efforts to provide clarity have repeatedly bumped up against Trump, who has contradicted him on policy changes or suggested that more tariffs are coming in ways that have amplified a sense of uncertainty.

That same drama was played out later on Wednesday as Trump suggested he would choose tariff rates if no deals were reached.

“By the way, if we don't have a deal with a company or a country, we're going to set the tariff. That will happen, I would say, over the next couple of weeks ... over the next two, three weeks we'll be setting the number,” Trump said from the Oval Office.

Trump's launch and then delay of new tariffs has created uncertainty about his policy goals, with the US president indicating that he wants new agreements and tariff revenues in order to reduce income taxes.

“That money is going to be used to reduce taxes,” Trump said. “We're going to get big, big tax breaks.” The US president also suggested that he might increase import taxes on autos from Canada. Trump has a 25 per cent tariff on autos, although there are some exemptions related to the US-Mexico-Canada Agreement, and automakers are seeking other policy changes to minimise the tariff burden. Trump has separate 25 per cent tariffs on Canadian goods ostensibly to address drug smuggling into the US.

"I really don't want cars from Canada," Trump said, “So when I put tariffs on Canada, they're paying 25 per cent, but that could go up in terms of cars. When we put tariffs on, all we're doing is saying that we don't want your cars, in all due respect.'”

Trump cautioned that he's not currently considering additional auto tariffs, but he said there could be an increase.

After Bessent's remarks, reporters asked him about a Wall Street Journal article that said the huge US tariffs that the Republican president has levied on China could be cut in half, citing unidentified people familiar with the matter.

Bessent said: “I'd be surprised if that discussion is happening." However, he said he expects “there'd have to be a de-escalation” from Washington and Beijing's trade confrontation.

Trump had said on Tuesday that the 145 per cent tariffs on China could “come down substantially." And then on Wednesday, he told reporters that “everybody wants to be a part of what we're doing" and “everyone's going to be happy.”

Later in the day, White House press secretary Karoline Leavitt said on Fox News Channel's “America Reports” that “there will be no unilateral reduction in tariffs against China. The president has made it clear China needs to make a deal with the United States of America,” she said. "And we are optimistic that will happen."

Still, Bessent's speech in Washington represented a broadside against the IMF and the World Bank, which provide loans and other financial support around the world. He said the Trump administration “will leverage US leadership and influence at these institutions and push them to accomplish their important mandates.”

Some of Bessent's criticisms echoed the Trump administration's efforts to root out progressive ideology from federal institutions. Bessent said the IMF “has suffered from mission creep” and “devotes disproportionate time and resources to work on climate change, gender and social issues.”

He said that there were similar problems at the World Bank, which he said “should no longer expect blank checks for vapid, buzzword-centric marketing accompanied by half-hearted commitments to reform.”

Despite the criticism, Bessent's support for the IMF and World Bank came as a relief for development bankers and analysts, who partly expected announcement of a US withdrawal from the organisations.

Last October, Jay Shambaugh, former undersecretary for international affairs, alluded to a Project 2025 proposal for the U.S. to pull out of the IMF and World Bank if Trump won the 2024 election.

Shambaugh had said that without US leadership, “We would have less influence and we would weaken these institutions. We cannot afford that.”

Bessent instead, conveyed a message of deepening US involvement with the institutions. But one of the problems, Bessent said, is that China is still treated like a developing country, which gives it more favourable treatment from global institutions. With China as the second-largest economy in the world, he said, “It's an adult economy.”

Despite growing friction between Beijing and Washington, Bessent said, “There is an opportunity for a big deal here.” Bessent wants the US to boost manufacturing while China increases consumption, making its economy less reliant on flooding the globe with cheap exports. “If they want to rebalance, let's do it together,” he said. “This is an incredible opportunity.” Beijing said Wednesday that “exerting pressure is not the right way to deal with China and simply will not work.”