As many expected, the US's insistence that its decision to prosecute the daughter of one of China's preeminent corporate titans wouldn't have any bearing on the trade truce has already been categorically refuted by China, which has threatened "severe punishment" against Canada (and now the US) if Meng Wanzhou isn't released.
But that hasn't stopped senior Trump administration officials from trying to revive the narrative (but only hurting the prospects for a market recovery in the process). Case in point: During an appearance on CBS's Face the Nation where he insisted that Meng's arrest wouldn't impact US-China trade talks, Trump Administration Trade Rep. Robert Lighthizer said that the March deadline for the 90-day trade negotiations is a hard deadline that won't be moved by the administration.
"He's not going beyond March," Lighthizer said.
MARGARET BRENNAN: So you-you have until March, but you could extend these talks. That's not a hard deadline?
AMB. LIGHTHIZER: As far as I'm concerned it's a hard deadline. When I talked to the president of the United States he's not talking about going beyond March. He's talking about getting a deal. If there is a deal to be gotten, we want to get it in the next 90 days.
MARGARET BRENNAN: The tariffs you're talking about don't have to do with technology though. In the technology space, will you take action against Chinese firms? Should we expect more actions like the arrest of the Huawei CFO? I know you say that the crime doesn't directly link here but there are those who say Chinese telecom should be completely banned from American companies.
AMB. LIGHTHIZER: Well, it's not my position that we should ban telecom from from China into the United States. It certainly is true that there will be continuing criminal justice matters that'll go on. It'll come up. There's been a number of indictments, there's been a number of actions in this space generally. For me those are separate. They're separate from the negotiations. We're looking for structural change and we're looking for market access. That's what we're looking- the criminal justice process will continue. We have an independent system as you know in this country.
MARGARET BRENNAN: So when the markets open tomorrow can they be reassured that these talks with Beijing are happening and that you're making progress?
AMB. LIGHTHIZER: They can be reassured that if there is a deal that can be made that- that will require or assure the- the- the protection of U.S. technology, the very heart bed of all of our economy it's not just technology it's everything from services to manufacturing even farming is a technology industry now in the United States. We will protect that technology and- and- and get additional market access from China. If that can be done, the president wants us to do it. If not, we'll have tariffs.
Offering more details about the parameters for any lasting trade truce, Trump advisor Peter Navarro said Friday during an appearance on CNBC that any deal with China must include concessions on China's policy of institutionalized IP theft, as well as a commitment that China will end its state-sponsored cyber-espionage to steal US technology (a transcript of the interview was published by ValueWalk).
Navarro also insisted that the prosecution of the Huawei CFO wouldn't impact trade talks with China, saying that the issues are completely separate (though it's becoming increasingly clear that China doesn't see it that way).
PETER NAVARRO: Well, you raise the perfect point, to be honest. And I think one of the great things about the leadership of Donald Trump is he’s changed completely the narrative on China forever. Up until the time that President Trump took office, we went by this policy of economic engagement thinking that if we simply engaged with China, they would become more democratic and peaceful and more free market oriented. Just the opposite occurred and here we are in this mess. And so we have the Marriott hack, we have the bright light shown on Huawei, which is a very bad actor in the international arena. The other thing, there’s an excellent article in the “Wall Street Journal,” Pulitzer quality, my judgment on the game that China played to invade our export controls on a very sensitive satellite with military technology. These are the kinds of things that China needs to understand that the United States will no longer tolerate. So in terms of anything that happens within the 90 days, we are open and hopeful that a deal will take place but it has to be structural change, verifiable with actual results in order to make this all go. Otherwise we have to defend ourselves as a nation. And President Trump, great leadership on this. He will stand up for the American worker, for American businesses, American farmers against what is well documented Chinese aggression by the Department of Defense and the Secretary of the State and a wonderful speech by Vice President Mike Pence.
PETER NAVARRO: So two things here. The dinner itself, it was a historic event. I think we have the potential here of doing something much grander than Kissinger and Nixon did many, many decades ago, in terms of bringing China fundamentally into the global economy in a completely different way structurally. But yes, there is skepticism, simply because of China’s past reputation on these matters. So I guess we’ll see what happens. But there’s much at stake here, there’s much at stake here. So it’s really up to the Chinese now. In terms of what we give back, I mean therein lies the rub. President Trump has been eloquent in stating that we are the piggy bank of the world. We’re in all these sorts of one sided bad trade deals and the problem that we have whenever we negotiate with whoever we negotiate is they are getting such a great deal they really don’t want to give us anything. So we are not prepared to give them anything in terms of a deal quid pro quo because we are so much behind the eight ball. We are not steal their technology. We are not forcing the technology transfer. We are not manipulating our currency. We are not counterfeiting and pirating Chinese goods and flooding their markets. We are not having state owned enterprises run rampant around the world, basically exploiting the rest of the world. So what is there for us to give? What we have to give is access to our markets, period. The largest market in the world. Access to our financial markets, our capital markets.
PETER NAVARRO: So I’m here in Washington not Las Vegas. So I’ll let the markets handicap that. But what I can tell investors is this: this is a historic time. It is critical for the long-term health of the financial markets for the economy to get this right. We had 15 years of China engaging in predatory behavior basically draining over 70,000 factories from America, over 5 million manufacturing jobs. During that time, we had 2% or less growth. We had stagnant wage growth. We had this so called new normal to sin like a Paul upon the world. If we don’t get the China thing right, not just the United States but for the rest of the world we won’t be able to have the next leg of global growth we are looking for. And again that speaks to the leadership of President Donald J. Trump, he sees that vision, he sees that future, he is willing to stand up in order make that happen. And the door is open to China changing. They know what needs to be done. And we hope that they sincerely take actions not to see they will do it, but to actually do it. And it’s all about structural change. It’s not about cash or commodities. It’s structural change.
Insisting that a deal must be made within the negotiating period might be a helpful tactic to try and strong arm the Chinese into a concession (though, if anything, President Xi has shown that he won't be pressured into accepting a deal that he believes isn't in China's best interest), but it's unlikely that the markets will find Lighthizer's comments very reassuring. Bulls can only hope that the market starts listening to JPM quant strategist Marko Kolanovic, who we can only imagine will write off reports about the unraveling trade detente as just more "fake news."