WH Adviser Navarro's clarification can't undo damage to phase one trade deal

China’s Global Times recently criticized White House Adviser Peter Navarro’s comments on the Phase One trade deal. The state-backed media signaled that Huawei has been a victim of the negative policies from the US.

Key quotes

While White House trade adviser Peter Navarro denied saying that the phase one trade deal was "over," his clarification is far from satisfying at all as the US-China economic and trade relations have much more to make up for.

While clarifying the misunderstanding, the statement made no secret of Navarro's hostility toward China, which makes one wonder which version of his story is true.

Despite the clarification, Navarro's irresponsible comments have already had an impact on financial markets and the deal itself. As a person close to the deal talks, Navarro has actually cast suspicion on the trade deal with his reckless and contradictory attitude. If anything, he needs to show more goodwill or positive signals to offset the negative impact, so as to prevent further losses in the market arising from such uncertainty.

The US government needs to reflect on all the battlegrounds it has opened against China in recent months, including but not limited to its crackdown on Chinese high-tech companies like Huawei, the US threat of revoking Hong Kong's special trade status, and its spat over flight resumptions, among others.

As a result, bilateral relations are on the brink of a new Cold War amid unprecedented tensions, bringing increasing uncertainties to the economic relationship. Only by reflecting on and making efforts to remedy the damage that has been caused to US-China relations on multiple fronts can bilateral economic and trade ties return to a normal track.

FX implications

Although the Chinese news is famous for its use of harsh statements against the US, such updates do spread market pessimism and work against the risk-barometer. That said, the AUD/USD pair portrays such a move by staying depressed near 0.6930 as we write.

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