In recent weeks, Donald Trump has threatened to impose tariffs on $450 billion worth of Chinese imports, baited the European Union into imposing duties on $3 billion worth of American exports (enough to force Harley-Davidson to relocate some of its operations to Europe), and prepared to slap across-the-board tariffs on foreign cars.
All this took a toll on the U.S. stock market, as American companies with strong ties to the EU and Chinese markets saw their share prices fall. And on Sunday night, the news for investors turned even grimmer: The Wall Street Journal reported that the White House was preparing to prohibit several Chinese companies from investing in American tech companies that possessed “industrially significant technology.”
Such a policy makes a modicum of sense. China’s various attempts to narrow America’s technological advantage by leeching intellectual property from U.S. firms has attracted bipartisan condemnation — and limiting Chinese investment in American tech companies is a logical means of addressing that issue.
But it’s also a logical means of reducing the value of many American companies’ stocks. Wall Street registered its discontent Monday morning — and then Steve Mnuchin’s attempt to calm the markets backfired spectacularly.
The Treasury secretary tweeted Monday that “the stories on investment restrictions in Bloomberg & WSJ are false, fake news.” The White House wasn’t about to limit Chinese investment in U.S. companies, Mnuchin assured investors — rather, it was about to limit investment from all “countries that are trying to steal our technology.”
The Dow proceeded to fall 500 points. So, by mid-afternoon, the administration decided to see if one of its other officials could ease Wall Street’s fears. Somehow, they concluded that Peter Navarro — the president’s proudly protectionist trade adviser — was the best man for that task.
And Navarro proved them right — by (ostensibly) announcing that Mnuchin had lied.
“There’s no plans to impose investment restrictions on any countries that are interfering in any way with our country,” Navarro told CNBC. “This is not the plan.”
He then explained that “today’s market reaction is a very large overreaction,” because Trump’s various trade wars have actually been “a tremendous success for this country and this market. It’s very bullish.”
Investors appeared to eat up Navarro’s bullish shtick. In the final hours of trading, the Dow rebounded, and closed down a mere 328.09 points.The S&P 500 and Nasdaq composite fell 1.4 percent and 2.19 percent on the day, respectively.
As of this writing, it remains entirely unclear what the White House’s policy on Chinese investment in U.S. tech companies actually is.