Confusion Over Navarro’s China Trade Comments Roils Markets
When asked about progress on the trade deal, Navarro responded “it’s over.”
(Bloomberg) -- Confusion over comments made by White House trade adviser Peter Navarro on the U.S.-China trade deal roiled markets from stock-index futures to the yuan.
Contracts on the S&P 500 Index fell as much as 1.6% and the offshore yuan weakened 0.4% after multiple media outlets said that a remark made in response to a Fox News interview suggested the trade deal was “over.”
Navarro said his remarks were “taken wildly out of context” and he was only speaking about “the lack of trust” the Trump administration has in China’s government. U.S. index futures reversed all losses following the clarification, while the yuan was little changed. President Donald Trump said in a Twitter post that the trade deal between the two countries remains “fully intact.”
Navarro’s comments come against a backdrop of rapidly worsening relations between the world’s two largest economies. With Washington and Beijing sparring over the coronavirus, Hong Kong, human rights, technology, and other flash points, focus is also turning to the implementation of the ‘phase one’ trade deal signed in January.
Chinese officials have insisted that they intend to stick to the deal, which implies increasing imports from the U.S. By a total of $200 billion over two years. The economic slump caused by the coronavirus has made reaching those targets doubtful, though the U.S. had signaled some flexibility.
“Everyone thinks what happened was very strange and it created confusion,” said Zhou Hao, an economist at Commerzbank AG. “At the end of the day, what investors care about is whether this trade deal still exist, and they would feel alright as long as officials don’t tear up the agreement publicly. The collapse of the deal is still a low-risk scenario.”
Navarro is not the decisive voice on the future of the trade deal. The architect of the agreement, U.S. Trade Representative Robert Lighthizer, said last week that the phase one agreement is “enforceable” and the U.S. fully intends to carry it through.
China’s foreign and commerce ministries did not immediately respond to a request for comment.
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