Tensions with China again have taken the forefront of investors’ minds over the Covid-19 pandemic, with conflicting statements from the Trump administration whipsawing markets.
MANHATTAN (CN) — Markets looked poised for a down day Monday night after comments from a leading White House official that the U.S.-China trade deal was dead, but they recovered after President Trump assured it was not.
The Dow Jones Industrial Average opened on Tuesday to a 230-point gain, with the S&P 500 and Nasdaq trailing closely behind.
Investors were temporarily rattled Monday evening when White House trade adviser Peter Navarro said on Fox News that the recent trade deal with China was finished.
Under first phase of the trade deal, China agreed to purchase an additional $200 billion in U.S. agricultural products and other items in exchange for lower U.S. tariffs. The second phase of the deal, considered its stickier half, concerns cyber theft.
Calling into question whether the deal is a dead duck, however, are the economic slowdown brought about by the Covid-19 pandemic, as well as rising political tensions between the two countries.
“Obviously really wanted to hang on to this trade deal as much as possible … but given everything that’s happened and all the things you just listed, is that over?” Fox host Martha McCallum asked Navarro on Monday during an exchange over Chinese concentration camps and information warfare.
“It’s over, yes,” Navarro replied.
“Here’s, I think, the turning point,” he continued. “They came here on January 15th to sign that trade deal, and that was a full two months after they knew the virus was out and about. It was a time when they had already sent hundreds of thousands of people to this country to spread that virus, and it was just minutes after wheels up when that plane took off that we began to hear about this pandemic.”
Navarro is a particularly hardline hawk on China, and he has repeatedly blamed China for the creation and spread of Covid-19 — hinting it was biowarfare gone wrong from the communist regime. “A bill has to come due for China” over its handling of the pandemic, Navarro said last month.
Futures in the three major U.S. exchanges dropped sharply after Navarro’s comments only to recover once the president clarified Phase 1 was not over.
Markets in Asia had a rocky outing but ended the day slightly up, with Hong Kong’s index leading with a 1.6% gain.
“The China Trade Deal is fully intact,” President Trump tweeted later Monday evening after stock futures began to drop. “Hopefully they will continue to live up to the terms of the Agreement!”
Navarro later said that his comments had been taken “wildly out of context” and that he was not referring to the Phase 1 trade deal. “I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.”
Wall Street has been whipsawed by conflicting statements out of the administration regarding the trade deal.
The president said in May that he “lost a little flavor” for the trade deal and wrote on Twitter that “100 Trade Deals wouldn’t make up the difference” for the tens of thousands of lives lost due to the pandemic.
But key trade and economic advisers to the president have repeatedly said the deal was not dead. Larry Kudlow, director of the National Economic Council, has repeatedly said the trade deal was “going well.”
Last week U.S. Trade Representative Robert Lighthizer testified to the Senate that China had purchased $1 billion worth of cotton from the United States. “I expect them to live up to the agreement,” he said during his testimony. “They have indicated they will.”
The potential for a new U.S.-China trade war has damaged markets, sometimes eclipsing the economic collapse and death toll from the pandemic. Markets fell after Beijing announced a new national security rule in Hong Kong that threatened the city’s autonomy. Investors have since worried that China would not be able to hold up its end of the deal under the Phase One deal.