Economist Mohamed El-Erian told CNBC on Monday that he doesn’t think the phase one trade agreement is the first step to a long-term cooling in U.S.-China relations.
In fact, the chief economic advisor at Allianz said he believes that the tensions will be further inflamed after the upcoming 2020 presidential election ends.
“I think past November, we’re going to be back in a trade war,” with the risk of it escalating into an “investment war” and a “currency war,” El-Erian said on “Squawk Box.”
Officials from the U.S. and China announced on Friday that the two countries had agreed to a partial trade deal after an 18-month trade war, in which both sides placed billions of dollars of tariffs on each other’s imports.
As part of the deal, China agreed to increase agricultural purchases from the U.S., while President Donald Trump said he would not implement a new batch of tariffs that had been set for Sunday.
U.S. Trade Representative Robert Lighthizer said the plan is to sign the agreement in January.
However, some details — particularly around changes to intellectual property, technology and financial services, as well as amounts of farm purchases — remain murky.
El-Erian has long been skeptical that the U.S. and China could craft a trade deal that fully addresses many of the pressure points between the world’s two largest economies.
In August, for example, he told CNBC that a cease-fire, not even a truce, was the “best we can hope for.”
On Monday, El-Erian called Friday’s agreement a “truce,” but remains doubtful it will lead to a meaningful resolution.
El-Erian said that while it may be a “constructive” force for the stock market, he thinks the agreement will reduce uncertainty in the business community enough to lead to more investment.
“Those who extrapolate this to mean a long, durable, comprehensive trade deal are wrong,” he said. “The most likely next step is further tensions. All we’re getting here is in both side’s interest to just have a truce for the short term.”