US stocks tumbled to session lows after the Nikkei reported that Trump's trade adviser told the owner of the FT that it would be "difficult" for the U.S. and China to arrive at an agreement after the 90-day period of talks unless Beijing was prepared for a full overhaul of its trade and industrial practices.

In an extensive interview at the White House on Thursday, Peter Navarro, an assistant to the president as director of trade and industrial policy, said there are "no half-measures", and that China has to address all of America's concerns for the two sides to come to terms. Those include forced technology transfers - a topic which Beijing has resolutely refused to address - as well as cyber intrusions into business networks, state-directed investments, in addition to the usual complaints about tariffs and nontariff barriers.

Commenting on Beijing's "Made in China 2025" initiative, a blueprint for pivoting the country into a leading position in areas such as artificial intelligence and fifth-generation wireless communication, Navarro called it a "label for a Chinese strategy to achieve dominance in the industries of the future".

"China is basically trying to steal the future of Japan, the U.S. and Europe, by going after our technology," Navarro said, virtually assuring that no deal will be achieved in the allotted timeframe.

Meanwhile, while noting that China has recently abandoned public use of the phrase "China 2025," Navarro said that "no one in Japan or the United States really believes that they have abandoned the goals of China 2025".

Pointing to a panel listing 53 examples of China's economic aggression, including items such as "consolidating of state-owned enterprises into national champions," "debt-trap financing to developing countries," and "dumping below cost into foreign markets," Navarro said, "Virtually everything on here is against the rules of the World Trade Organization," and that China would have to address all of the issues "if we are going to have a negotiation that results in success".

To Navarro, intellectual property theft is part of China's culture as a communist state. "It goes back to the communist system, where there are no property rights. If there are no property rights, you can't steal property, right?"

Touching on the hot topic du jour, Navarro said that smartphones manufactured by China's Huawei pose a clear risk in that "those phones can be used to spy on our citizens or our government." He said that the constant software updates were the main source of concern.

Separately, commenting on the Fed's rate hike, Navarro said: "We don't understand why the Fed is acting so contractionary, at a time when there's no inflation to worry about." Regarding the central bank's forecast for two more rate hikes next year, Navarro said, "We think that's two too many".

While Navarro's monetary sentiment was clearly dovish, it was his comments on the feasibility of a Chinese truce that spooked traders and sent the S&P to fresh session lows as markets are once again facing a sharp plunge into the close.

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