White House trade adviser says impact of tariffs on stock market a 'false narrative'

White House trade adviser Peter Navarro downplayed fears that tariffs were the leading cause of recent declines in the stock market.

“I think that’s a false narrative, in terms of the impact of tariffs on the stock market,” Navarro, director of the White House National Trade Council, said during an interview on “Sunday Morning Futures.” “My view is that this is strictly an interest-rate effect. I think the Fed went too far, too fast.”

The Dow Jones Industrial Average plunged more than 1,000 points at the close of last week’s trading session. On Friday alone, the Dow closed 559 points, or 2.2 percent, lower. The S&P 500, in addition to the Dow, is now negative for 2018.

“What we saw basically was a little asset reallocation from the stock to the bond market,” Navarro said. “We’ve had some impact on the housing market. In terms of the dollar, it’s too strong now and that’s exacerbated our trade deficit. But this is a normal adjustment; to me it’s not even a correction.”

But worries over the trade relationship between the U.S. and China (both countries recently reached a “trade truce”) caused the most volatility last week, particularly after the arrest of Meng Wanzhou, the chief financial officer of Chinese telecom giant Huawei. Wanzhou, the daughter of Huawei’s founder, was arrested in Canada on Dec. 1 for allegedly trying to evade U.S. sanctions on Iran and faces extradition to the U.S. If she is extradited, Meng would “face charges of conspiracy to defraud multiple financial institutions,” and a “maximum sentence of 30 years for each charge,” according to Reuters.

China’s Vice Foreign Minister Le Yucheng told U.S. Ambassador Terry Branstad on Sunday that Washington made an “unreasonable demand” by asking Canadian officials to arrest Meng in Vancouver, according to Reuters, which cited China’s Foreign Ministry.

“The actions of the U.S. seriously violated the lawful and legitimate rights of the Chinese citizen, and by their nature were extremely nasty,” Le told Branstad, according to Reuters. He also requested the U.S. withdraw the arrest warrant on Meng.

Still, Navarro sees the arrest and market’s plummet as two independent events and said the focus should be more on what President Trump and Chinese President Xi Jingping accomplished at the Group of 20 summit in Buenos Aires earlier this month.

“The president of China spent 45 minutes providing a detailed plan to address the various structural issues facing our two nations,” Navarro said, specifically noting matters like forced technology transfer, intellectual property theft and the currency manipulation.

U.S. Trade Representative Robert Lighthizer said on Sunday that successful trade negotiations between Washington and Beijing must be reached by March 1, otherwise the U.S. will impose new tariffs.

"As far as I am concerned, it is a hard deadline. When I talk to the president of the United States he is not talking about going beyond March," Lighthizer told CBS’ "Face the Nation.”

And Navarro is confident that the Chinese will deliver on what he called their “promise to have concrete, verifiable actions with concrete, verifiable results.”

“We should be optimistic,” he said. “But the markets shouldn’t pin their hopes on that, because that’s not what this is all about … The China trade is a small part of our overall economic growth and world trade. And I think what we need to do is focus on the structural adjustments that are occurring here in this economy.”