By Chelsea Mes and Jeffrey Black

U.S. President Donald Trump said the phase one trade deal with China was “fully intact,” after his adviser Peter Navarro sowed confusion and spurred a temporary stock slump with comments interpreted as a decision to end the agreement.

Navarro had responded to a long question by Fox News interviewer Martha MacCallum asking whether aspects of the deal were “over” by saying: “It’s over. Yes.”

U.S. futures swung wildly with the yuan as the remarks caused concern that the deal signed in January, which paused the trade war between world’s two largest economies, was in jeopardy. Navarro later said his comments “have been taken wildly out of context.”

From the transcript:

MacCallum: You know, when -- do you think that the president sort of -- I mean, he obviously really wanted to hang onto this trade deal as much as possible. And he wanted them to make good on the promises, because there had been progress made on that trade deal, but given everything that’s happened and all the things you just listed, is that over?

Navarro: It’s over. Yes.

The market reaction and rapid response by Trump signal the sensitivity over the trade agreement at a time when the global economy is being pummeled by the coronavirus and faced with growing worries over the relationship between Washington and Beijing. The two nations are locked in confrontations over the pandemic, Hong Kong, human rights and technology.

Contracts on the S&P 500 Index fell as much as 1.6% before paring losses and the offshore yuan weakened 0.4% after multiple media outlets reported the remarks.

Chinese officials have insisted that they intend to stick to the deal, which implies increasing imports from the U.S. by a total of $200 billion over two years. The economic slump caused by the coronavirus has made reaching those targets doubtful, though the U.S. had signaled some flexibility.

Navarro isn’t the decisive voice on the future of the trade deal. The architect of the agreement, Trade Representative Robert Lighthizer, said last week that the phase one agreement was “enforceable” and the U.S. fully intended to carry it through.

China’s foreign ministry, which has previously denounced Navarro as a “habitual liar,” dismissed his latest remarks, referring questions about the trade deal to “the competent authority.”

“You referenced some words by Mr. Navarro,” ministry spokesman Zhao Lijian told a regular news briefing Tuesday in Beijing. “He has a habit of talking out of his hat. There is no credibility to what he said.”

--With assistance from Miao Han, Sharon Chen and Jing Li.

To contact the reporters on this story:

Chelsea Mes in Sydney at [email protected];

Jeffrey Black in Hong Kong at [email protected]

To contact the editors responsible for this story:

Daniel Ten Kate at [email protected]

Kasia Klimasinska, Brendan Scott

© 2020 Bloomberg L.P.