Expect a photo op and a ‘mock deal‘ at the Trump-Xi meeting — not a long-term truce, says economist

Expect a photo opportunity, a “mock deal,” and temporary market relief from the much-touted meeting between President and his Chinese counterpart at the , an economist said on Friday.

“We don‘t think this deal will be engineering a long-term truce between the two countries,” Bo Zhuang, chief economist and director of research at TS Lombard, said of the meeting in Buenos Aires, Argentina next week.

Zhuang told CNBC he expected a “photo op” and a probable “mock deal” from the meeting between the leaders of the world‘s two largest economies, “which means there will be temporary market-positive feedback from that.”

But trade tensions will continue to escalate, he added.

China‘s economy will be hit by the trade war, with real GDP growth getting shaved by 0.5 to 0.7 percentage points from the beginning of 2019, he said.

Zhuang said China doesn‘t want to provoke further escalation in bilateral relations with the U.S., but may actually let the weaken should the tariff fight continue.

As for the should the Chinese yuan decline further, Zhuang said there appeared to be little downside risks from that.

“Everything has already happened i.e. putting in tariffs, negotiations. Trade war was the worse case scenario even before being labeled a currency manipulator,” said Zhuang.