Scott Bessent From Beijing 5/14/26

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0:57Bring in show music, please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, high stakes in Beijing are Eamon Javers reports. This is one of the great questions of history. Can the U.S. and China manage not to fall into that trap of competition and conflict and war? Treasury Secretary Scott Besant joins us exclusively from China. President Trump today told Xi Jinping that he wants to open up China and China should open up. Besant said our two countries would create an AI safety protocol to develop the technology. The U.S. is the undisputed leader in the world here. We have the greatest AI companies.

1:44Plus chips, Taiwan, oil prices. West Texas crude six, nine months out is substantially lower. The curve is in substantial backwardation. A lot of news made in this conversation. You don't want to miss a moment. We're record production. We're an energy superpower. And we're just going to we're going to keep pumping. It's Thursday, May 14th, 2026. Squawk Pod begins right now. Stand under by three, two, one. Up in Andrew's 2 with Mike. Good morning and welcome to Squawk Box right here on CNBC. We're live at the NASDAQ market site in Times Square. I'm Andrew Osorkin along with Joe Kern. And Becky is off today.

2:26We grappled with everything yesterday. Really warm PPI numbers. I remember initially the Dow had been down, but the NASDAQ was up 300, right? The Dow was down about 100. The S &P was flat. Those numbers came out, and the NASDAQ's gains got paired from 300 to about 70. Remember that? And the Dow, which had been down about 100, was down 300. By the end of the day, the Dow barely ended lower. The S &P was up 44 points to a new high, another new high. And the NASDAQ was up, at one point, almost 400. What's your explanation? I don't, chips, China, chips. Did you see the NVIDIA news, which happened right before I was going to, at least Reuters was reporting it right before I was going to interview the Treasury Secretary about the H-200s is apparently going to be.

3:19And I think, you know, you talked about that. One of the reasons that it picked old Jensen up in Alaska was because this is such an important thing for... To throw a last-minute deal into the mix. Yeah.

3:35Under the new situation, President Trump and I, fully aware of the expectations of our two nations and the international community, have had multiple meetings and phone calls and kept China-U.S. relations generally stable. Thank you again, President Xi, for this beautiful welcome. And tonight it is my honor to extend an invitation to you and Madam Peng to visit us at the White House this September 24th. Key story of the day, President Trump meeting with Chinese leader Xi Jinping in Beijing. We're going to get straight over to Eamon Javers. He is on the ground in China this morning. Good morning.

4:17Yeah, good morning to you, Andrew. You're looking at live pictures now of President Trump arriving at the Great Hall of the People. This is for the banquet this evening. Remember, it is evening here in Beijing, and they have a star-studded cast of CEOs and political figures attending this state banquet at the Great Hall. You just saw the president arrive. They're about to get underway. We've seen cameras in the room. Elon Musk is there, along with a whole host of American CEOs as well. The president was greeted by pomp and ceremony earlier today at that same Great Hall of the People. We saw soldiers marching, adoring children.

4:56And of course, this handshake, which was a large part of the reason that President Trump traveled halfway around the world to come to Beijing to signal friendly relations with the Chinese side. And he hopes to cut some significant business deals. that the president at that meeting touted the size of his CEO contingent. Here's what he said. I just want to say on behalf of all of the great delegation that we have, we have the greatest businessmen, the biggest, and I guess the best in the world. We have amazing people, and they're all with me. Every single one of them. We asked the top 30 in the world.

5:36Every single one of them said yes. And I didn't want the second or the third in the company. I wanted only the top. and they're here today to pay respects to you and to China. And they look forward to trade and doing business. So some fairly effusive remarks from President Trump at that bilateral meeting. We also saw comments from Xi Jinping at that meeting. Two warnings for the U.S. side from Xi Jinping. One was on Taiwan. The Chinese leader said that the Taiwan issue, if the U.S. doesn't handle it properly, could lead to a dangerous confrontation between the two countries. He said Taiwanese independence is not compatible with peace in the Strait of Taiwan.

6:18So a stern warning there on the issue of Taiwan and also the Chinese leader bringing up this concept of the Thucydides trap, the concept that the rising power in the world will always challenge the established power in the world, and that will always lead to a conflict. Xi Jinping raising that sort of philosophical point to say that this is one of the great questions of history. Can the U.S. and China manage not to fall into that trap of competition and conflict and war that we've seen time and time again throughout history? So we'll monitor this state dinner that you're seeing right here, again, trying to get a sense as we look at these live pictures, guys, of who all is in the room.

6:59But it is a star-studded cast of CEOs and corporate executives there. Back over to you. Hey, Eamon, before you go, do you have any backstory, background on the whole Jensen pickup in Alaska story? And I ask, because Joe and I were just talking about this headline this morning about these H200 NVIDIA chips that may be now in the offing as part of a deal to 10 Chinese firms. Obviously, it sounds like he wasn't on the original either invite list or manifest or something. Yeah. So a couple of things, you know, I don't have all the detail on this, Andrew, so I have to be careful where we are. We don't have great communications.

7:37We haven't heard anything from the U.S. government, but we don't have any confirmation that anything new at all has happened with regard to NVIDIA and the chips. Right. I mean, if you read that Reuters story very carefully that crossed this morning, It's getting a lot of attention, and rightfully so. But the story does not say that anything new has happened here at this summit. What the story appears to my read to be referring to is approvals that the U.S. government made for sales of these chips back in December and January, right? So months ago, these approvals were made. And the Reuters reporters have uncovered new details about what exactly those approvals were.

8:15And it appears to me, again, to my read only, it appears that what they're talking about is that those approvals have not made a difference for NVIDIA because the Chinese have not made the purchases that have been approved. Why did the Chinese not make those purchases? Well, because they're concerned of a couple of things. One is they're concerned about Huawei, their domestic competitor. They want to beef up that company, so they want to steer business to them. They're also concerned about potential U.S. intelligence manipulation of the chips that are sold to the Chinese side for surveillance purposes.

8:47So the whole context of that Reuters story is that these approvals happened months ago. They still haven't resulted in sales. Jensen Wang is at this state dinner in order to try to break that logjam and to try to sell some of those NVIDIA chips. If he can, if the Chinese announce major purchases, that would be a big deal for NVIDIA. But it's my understanding, again, based on the information that I have here, that nothing new has been signed with regard to NVIDIA as part of this trip. And I think that's part of this trip. And I think that's why Treasury Secretary Besson told Joe earlier today in their conversation that he hadn't heard about that, that it was news to him.

9:23How do you know that? That's my read of what Besson— Oh, I'm sorry. It's hard for me to keep track of the— How do you know what Besson told me? It's hard for me to keep track of the time zones here, Joe. I can't tell what's past and what's future now. I apologize if I'm jumping the gun on your exclusive, which was great. No, he punted. And he said that's a commerce. That's a Department of Commerce situation. But even the Reuters piece, you're absolutely right, Amin. It was more interesting or it was more delineating who the 10 firms were. This is what we know. But then in an afterthought almost said, there's been no deliveries made up to this point.

10:04And Jensen Long really wants that to happen. And that's probably why he hopped on the plane. So, yeah, but you're right. We're going to play it right now. I just wanted to caution that you should play it. Yeah, we got a few things you haven't already. There's a couple of things you haven't already given away that are still in that we can, you know, hopefully... Make some hay out of? Yeah. Okay. Very good. Although, we should point out, if you were Treasury Secretary Besson, you let the president probably announce the biggest things. I wouldn't want to be front-running President Trump, but I think Treasury Secretary Besson is very measured in the things he was able to say.

10:49But I did speak with him in the middle of the night, here, over there, it was like afternoon or something, and started by asking him. to delineate any concrete progress that has come out of his meeting earlier with the vice premier and what is likely to come from the president's summit with President Xi. Here it is. Joe, the Chinese don't like any surprises, which is why President Trump is especially effective with them. But the vice premier and I, who have a very good working relationship, I think we've seen each other. This was either our eighth or ninth meeting. Worked on the agenda for today's meeting in terms of the economics, the deliverables.

11:32And so we talked about purchases. We talked about some issues that the Chinese side had. And we're going to talk about forming a board of trade for the bilateral trade between the U.S. and China. and we're going to talk about a board of investment that will be responsible for investment in nonsensitive areas. Mr. Secretary, you know, foreign investment in the U.S. is always a priority for this president, and I'm sure he'd like to announce a commitment that starts with the letter T, or trillions of dollars from China to make its way onto our shores. How do we balance such an increase in cooperation with all the ongoing security concerns we have with a country that we know wants to eventually eclipse the United States?

12:29Well, again, Joe, I'm not sure where this trillion-dollar investment number has come from. It's somehow gotten out into the ether. And the purpose of this board of investment is to decide up front what are the non-strategic, non-sensitive areas where it would be possible for the Chinese to invest. I chair something called CFIUS, the Committee on Foreign Investment in the United States. And what we want to do is make sure that these investments don't get referred to CFIUS. So this would pre-gain those investments just to make sure that they're not of a strategic, they are sensitive area. But look, there are plenty of things that the Chinese could invest in.

13:14in the U.S. and we're trying to push the same thing in the U.S. President Trump today told Xi Jinping that he wants to open up China and China should open up. China's domestic economy has been weak. The Chinese consumer needs to get a larger share of wages or labor needs to get a larger share of the GDP. It all tends to go back into manufacturing now. And China really needs to create a bigger consumer economy. And President Trump and the entire administration have been pushing them to do that. So there's a report from Reuters that just came out that the U.S. has cleared around 10 Chinese firms to buy NVIDIA's second most powerful AI chip, the H200.

14:02No No deliveries have been made so far, but this is obviously something that CEO Jensen Wong probably would like to see happen as far as a breakthrough. Can you confirm that's true and which companies would be allowed, approved, which Chinese firms to buy those chips? Yeah, Joe, this is news to me. I know there's been a lot of back and forth on the H200s, and we'll have to see on that. That's a Commerce Department function. Okay. At the same time, there's some competing narratives about the overall environment that we're looking at there. China's export economy continues. Xi apparently wants to show that he will not be bullied.

14:51Meanwhile, China's feeling the pinch from a myriad of internal and external pressures that we talk about, whether it's real estate. and I think it's in their best interest to stabilize relations with the U.S. But at the same time, President Trump would probably like to announce some positive news at this point. He's brought all those business leaders. Who is in a stronger bargaining position in your view? Who needs a deal more, in your view, and has the upper hand? Again, the U.S. is the deficit nation in terms of trade. And I used to teach economic history, and economic history would tell you that the deficit country always has a stronger position because we do have a deficit, and we are China's largest customer.

15:42Although President Trump has brought the trade deficit down to, it seems crazy to say, only$200 billion. He's laser-focused on getting it into balance, and that's the goal here. And that can be done one of two ways. Either the U.S. receives fewer imports from China or we sell more to China. And we're trying to balance that out. What's happened to China over the past year has been President Trump put up the tariff wall and China continued to push out goods into their export market. But the U.S., much of that market was blocked and the goods went to the rest of the world. And there was a lot of price pressure on those goods.

16:30So I don't know if you're familiar with the old saying, Joe, is we lose a dollar on every item, but we make up for it in volume. So the Chinese have tried to make up for it in volume. They've got a tremendous trade surplus. But if you look at the statistics, the profitability of the Chinese firms is way down. And that is even with massive subsidies from the government. We had Steve Danes, the senator on yesterday, just returned from China after leading a delegation. the secretary told us, I hadn't heard this before, the three B's, Boeing, beef, and beans. Will those all be discussed? And what else?

17:11Well, those are big. I think we're going to see the large Boeing orders. Beef was more, they're non-tariff trade barriers against our great American ranchers. And then soybeans, we have a very large purchase commitment from the Busan agreement for the next three years. So beans are really all taken care of. Although if I were the Chinese, I'd probably buy more beans now because there's a weather pattern called El Nino that we're probably going to see this year that typically results in very high soybean prices. Could there be some breakthrough on tariffs? There's another report that the two presidents may discuss cuts on roughly$30 billion worth of imports.

17:58Do you know which sectors are on the table there? And is this a good way to do it, to pick winners and decide which ones we're gonna allow in without tariffs and which ones we won't? Well, so we're going to form a board of trade. And the idea will be for non-critical, non-strategic areas, things that the U.S. doesn't want to make that we're never going to reshore. So something like fireworks or very low-end consumer goods that are going to keep coming from China no matter what. So we can uncharacterize those. And then there are many things that they want to buy from us. There was talk today about the Chinese buying more U.S.

18:42energy, and the U.S. is exporting a record amount of crude and LNG now, the only binding constraint. is our export facilities. We're going to be building more export facilities. We're going to be ramping up in Alaska, which is a natural for China. And given what's going on in the Mideast, we think that not only China, but countries all around the world are going to look to diversify away from the Middle East for a more stable source of energy. And what better place than the U.S.? But the idea of starting with 30 billion by 30 billion that both sides can designate, again, for non-critical areas and areas that we're not trying to reshore.

19:24Secker, do you have a sense on whether China will help with the strait and what China has communicated to us about the Strait of Hormuz? And I mean, that's obviously important to them as well. Do you think they're going to help? I think they're going to do what they can. And here, China has a much bigger interest in reopening the strait than the U.S. does. China gets about a third of its energy needs from the Gulf. So a reopening of the strait benefits China. Unfortunately, they were the largest consumer of Iranian oil. They were buying about 90 percent of it. Iranian oil represented about 10 % of their energy that they took in.

20:16But the rest of the countries in the Gulf were also substantial contributors, whether it was Saudi, UAE, Qatar. And China gets a substantial amount of their LNG from the Gulf also. You've talked about it. It's where we have. I'm sorry, sir. Go ahead. No, I was just going to say that China, it's very much in their interest to get the strait reopened. And I think they will be working with behind the scenes to the extent anyone has any say over the Iranian leadership. And the real problem here, Joe, is as you're aware, we didn't change the regime, but the regime changed. And it was several layers of leadership.

21:00They were decapitated, and it's very tough there just to communicate anything to anyone who is able to either act or get an overall agreement and speak on behalf of the Iranian leadership. Yeah. You've talked about this a lot, Mr. Secretary, and that is the strain that Iran is under right now, severe strain with the continuing blockade, hyperinflation, plunging currency, food and water shortages. The Supreme Leader allegedly, as you said, we're not sure who we're talking to at times, allegedly has begged companies to stop laying off workers for the good of Iran. Is there a breaking point for a regime whose priorities don't include the welfare of its people?

21:53Sure there is, Joe. And what we're seeing is the loading facility, the main loading facility for Iranian oil is a facility called Karg Island. We've seen that there have been no loadings in the past three days. We believe their storage is full. None of the ships are getting out. None are coming in, so they're not able to store oil on the water. So they're going to start shutting down their production. We can see that that's happening from satellite photos. But more importantly, Joe, exactly as you said, this is a diabolical regime. Thus far this year, they executed 30 ,000, 40 ,000 people, many of them peaceful protesters.

22:37And so how do you deal with a regime like that? You squeeze them economically. And we believe we're at the point where soldiers aren't getting paid. They're not able to replenish their weapons stocks from abroad. So, you know, I think that they are on their last legs. And the blockade, President Trump's blockade, has been a resounding success. At the same time, it's still a blockade on oil. Well, oil is up at over$100 a barrel today, just on West Texas, even higher on Brent. Do you still believe that the surge we've seen in gas prices and in inflation in general, had some hot numbers, PPI yesterday, CPI earlier, they're hot.

23:22Do you view that as something that'll be reversed quickly if the strait is reopened? And I guess I'd go on to say, do you think the president will accept no rate cuts right off the bat from the new Fed chief, Kevin Warsh? Well, a lot to unpack there, Joe. So let's do it one by one. I think in terms of what we're seeing here, we can see that crude, West Texas crude, six, nine months out, is substantially lower. The curve is in substantial backwardation. That's when the front month is much higher than the back month. So I believe the crude will come down quickly. We've seen the UAE come out of OPEC.

24:10So the market's going to be very, very well supplied. I think all the other energy producers, having not gotten oil out for a long time, are going to pump like crazy. And as I said earlier, the U.S., we're at record production. We're an energy superpower, and we're just going to keep pumping. So I think there's a potential for energy, crude, gasoline to come trundling back very quickly, which will mean that the look through to inflation will also come down very quickly. I was never on Team Transient during COVID, and a lot of that had to do with what happened with very expansionary fiscal policy that was financed by debt purchases from the central bank, kind of an experiment in modern monetary theory that caused inflation.

25:05But here, I firmly believe that nothing is more transient than a supply shock. And we can look through that because before the Iranian conflict began, core inflation was coming down. So I think core inflation will continue coming down. We'll get to the other side of this. And I don't know whether it's a few days or a few weeks. And energy, inflation will come back down. And we've got the start of the Warsh Fed. Kevin was confirmed last night, only one Democrat. John Fetterman from Pennsylvania voted for him. It just shows the dysfunction of the Democratic Party. He got a 99 voice vote when he was a governor last time.

25:54And I think that he's going to bring an open mind to this. And I actually think he's going to be in a very good position because we may get a series one, two more hot inflation numbers. But then I think we're going to see substantial disinflation. We're going to pause that interview for just a moment because President Trump is beginning to speak in Beijing right now. And let's take that live. And for so graciously hosting us on this very historic state visit. We had extremely positive and productive conversations and meetings today with the Chinese delegation earlier. And this evening is another cherished opportunity to discuss among friends some of the things that we discussed today, all good for the United States and for China.

26:46And it was a great honor to be with you, Liz.

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