Stocks Rebound After Trump Backs China Trade Deal His Adviser Dubbed 'Over'

President Donald Trump has vouched for the trade accord between the U.S. and China, in a tweet that boosted global stocks which had dipped sharply following comments by his top trade adviser that the deal between the countries was "over."

The Financial Times reported that markets across the region fell after the director of trade and manufacturing policy at the White House, Peter Navarro, answered a question on Fox News about the countries' Phase One trade deal, struck in January.

After Navarro had criticized China's human rights record and response to the coronavirus, host Martha MacCallum asked: "Given everything that's happened and all the things you just listed, is that over?" Navarro replied: "It's over, yes," before saying that China signed the trade deal two months after "they knew the virus was out and about."

Dow futures fell by 400 points after the comments USA Today reported. Trump tweeted shortly after the interview that the trade agreement with China was still in place, writing: "The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!" The Dow recovered to rise about 59 points.

The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!

— Donald J. Trump (@realDonaldTrump) June 23, 2020

Navarro later said that his comments had been "taken wildly out of context" and had "nothing at all to do with the Phase One trade deal, which continues in place."

"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," Navarro said.

Donald Trump and Xi Jinping
Donald Trump (L) and China's President Xi Jinping in Beijing on November 9, 2017. Trump has tweeted his support for the trade deal with China after comments from his top trade adviser that it was "over." NICOLAS ASFOURI/Getty Images

Tensions between Beijing and Washington have increased since they struck a deal in January when China agreed to buy an additional $200 billion in U.S. goods and services by 2021, on top of 2017 levels.

The Trump administration accuses Beijing of covering up the extent of the coronavirus and has called for an independent investigation into the cause of the pandemic.

In May, Trump said he was "torn" over whether to end the trade deal. A report by the think tank Center for Strategic and International Studies (CSIS) suggested China is lagging behind in its agreement to buy U.S. farm goods, and projected that exports of U.S. goods to China would only be $60 billion in 2020, less than a third of the $186.6 billion stipulated by the agreement.

Alicia Garcia-Herrero, chief economist for Asia-Pacific at investment bank Natixis, said that Trump is not as tough in his talk on China regarding trade.

"I think Trump is very confused as to what to do on China. On the one hand he likes bashing China on the origin and responsibility for the virus, since that helps towards his re-election but, on trade, things are different," she told Newsweek.

Referring to a boost to the stock market ahead of the Phase One deal in January, she said: "Markets like trade deals with China and so do exporters, many of which have voted for Trump in the past, especially in the energy and agriculture sectors.

"This is the reason why Trump's statements on the trade war tend to be less hawkish than those on China more generally, except when he is still in a negotiating and bargaining mode with the Chinese," Garcia-Herrero said.