Stocks closed lower on Tuesday afternoon after reports that the U.S. would not be rolling back tariffs on China until after the 2020 presidential elections. One expert is pessimistic that relations between the two countries will improve anytime soon.
“This relationship is going to continue to deteriorate over the course of years,” said Leland Miller, CEO of China Beige Book on Yahoo Finance’s The Ticker. “This is a competition that's going to go years and decades forward.”
This competition includes the race for global 5G dominance as the U.S. pressures allies to drop Chinese telecom giant Huawei from their networks. Miller said the Trump administration is also gearing up to increase export controls targeted at China this year.
“I think the idea that people were expecting something in the next few months was unrealistic,” said Miller.
But despite the looming battle between the two nations, Miller said for this year both sides “have a reason to stay on their best behavior” and it should be a good year for the markets.
A joint statement from Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer released Tuesday confirmed that “there is no agreement for future reduction in tariffs” and there are “no other oral or written agreements between the United States and China on these matters.”
The specifics of the deal will be made public on Wednesday, when Chinese Vice Premier Liu He is expected to be at the White House to sign the “phase one” trade deal with pledges and commitments to ramp up U.S. goods and services purchase over two years.
But despite the optimism surrounding the developments with China, Miller suggested the deal could be difficult to enforce.
“All the talk about the enforcement mechanism has always been a little bit tongue in cheek — there's no real way to make the Chinese do any of this stuff,” said Miller.
“But what you can do is put very big sticks and very big carrots and that's what they've done,” he added.
Grete Suarez is a producer at Yahoo Finance for YFi PM and The Ticker. Follow her on Twitter: @GreteSuarez