Mohamed El-Erian sees US-China economic war beyond trade after voting

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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.

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“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.

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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.”

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