Economist Mohamed El-Erian Predicts Ongoing Economic War Between China and the U.S.

December 26, 2019

In an interview in early December, Mohamed El-Erian, chief economic advisor at Allianz, revealed that he does not anticipate a permanent end to the U.S. – China trade war anytime soon.

Although U.S. and China officials had just announced a partial deal after 18 months of trade war, El-Erian stated that he does not think this agreement signals long-term improvement in relations between the two countries.

Instead, the economist suggested that the stakes could be even higher after the 2020 presidential election next November.

“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’,” the economist said.

The recent trade deal referenced by El-Erian contains provisions which prevent the instatement of a new round of U.S. tariffs against China. In exchange, China has committed to increase agricultural purchases from the U.S.

Although the agreement is scheduled to be signed in January, many of its details have not yet been ironed out.

The exact amount of agricultural purchases expected from the Chinese government, as well as changes to policies regarding technology and finance, have not yet been established.

Under these circumstances, El-Erian said that he remains skeptical about the longevity of a U.S.-China trade deal. He referred to the new partial deal as a “truce” that is mutually beneficial for both countries and their investors.

However, he was reluctant to describe the agreement as anything more than a temporary pause to tensions between the Chinese and American governments.

“Those who extrapolate this to mean a long, durable, comprehensive trade deal are wrong,” El-Erian said.

Sincerely,

Doc Wellington

Retirement Insider