White House Trade Adviser Peter Navarro on Tuesday reassured Americans that the economy was “solid as a rock.”
His remarks came after the DOW fell more than 760 points Monday—amid an escalating trade war with China—to mark the worst trading day of 2019.
Appearing on “America’s Newsroom,” Navarro told anchors Sandra Smith and Rick Leventhal that sentiment on Monday was nothing more than classic “irrational pessimism.”
He said that, “What happens in those kinds of days if the DOW starts going down, then you get the day traders going in, the program traders coming in—it kind of takes a life of its own.” He told Smith and Leventhal that “stepping back from that” and looking at the “economic fundamentals” will show the economy is “doing great.”
After President Trump threatened new tariffs in a series of tweets over the weekend, China retaliated by allowing the yuan's exchange rate to sink below the politically sensitive level of seven per dollar—the weakest level in over a decade.
“Countries are coming to us wanting to negotiate REAL trade deals, not the one-sided horror show deals made by past administrations. They don’t want to be targeted for Tariffs by the U.S. Things are going along very well with China,” the president wrote. “They are paying us Tens of Billions of Dollars, made possible by their monetary devaluations and pumping in massive amounts of cash to keep their system going. So far our consumer is paying nothing - and no inflation. No help from Fed!”
If the United States follows through with the threatened tariffs on September 1, 2019, it will tax essentially everything imported from China.
Navarro alleged that the market will be “bullish” moving forward “if we get two things.” He said that getting the USMCA (U.S.-Mexico-Canada Agreement) passed by the end of September or early October would give a “really nice boost in growth and bring jobs back home here.”
Secondly, Navarro said that the Federal Reserve needs to lower interest rates by “at least another 75 basis points or a hundred basis points” by the end of the year “to bring interest rates here in America in line with the rest of the world.”
“We have just too big a spread between our rates and that costs us jobs. High interest rates suppress investments in this economy and they suppress exports through a currency effect,” he said.
The president also called out China’s currency drop on Monday: “Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”
“China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore,” he wrote.
Navarro added, “Branding them a currency manipulator provides the secretary of the treasury and the president with a broad array of tools to counteract or countervail that action. So, they’ve got to stop doing that. The exchange rate breached seven yesterday, which was a big threshold. But, as soon as the president was firm…the Chinese announced that they’re stabilizing. So, they heard us.”
The market bounced back somewhat Tuesday with the DOW regaining 311 points by closing. As far as an impending deal with China, Navarro recommended letting the negotiations take place behind closed doors.
“That’s the way to success,” he said.
On Tuesday the president said that the United States is “in a very strong position when it comes to China” and that he would do “what no other president would do” again next year if necessary.