Trade war will ‘get worse before it can get better’: analyst

Wall Street is cheering President Trump’s statements that the U.S. and China are going back to the table for another round of trade talks, days after both sides escalated their tariff fight.

But Isaac Boltansky, the director of policy research at Compass Point Research and Trading, is skeptical there will be a resolution to the trade war soon.

“Our message to clients today is that you should look at those headlines with a healthy degree of skepticism,” he told Yahoo Finance’s “The First Trade.” “This story has to get worse before it can get better.”

“We’ve seen both sides of the Pacific dig in more. There’s political pressure in China and the president also sees trade as a political issue that can help him in 2020,” he said. “I think that we have to see more deterioration in these talks before we can see some sort of detente.”

At a news conference at the G7 in Biarritz, France, Trump told reporters he thinks China wants to make a trade deal “very badly,” and will have to in order to save its slowing economy.

"I don't think they have a choice," he said.

U.S President Donald Trump listens to French President Emmanuel Macron during the final press conference during the G7 summit Monday, Aug. 26, 2019 in Biarritz, southwestern France. (AP Photo/Francois Mori)

Boltansky says the U.S. doesn’t seem to have a choice either.

“We’re starting to see real world pain from some of the political rhetoric over the past year,” Boltansky said. “These trade wars are going to continue to weigh on business optimism, consumer confidence and the commitment on the CAPEX side.”

Don’t expect any resolution until the realities of the 2020 campaign start to kick in, he said.

“I think the president still wants to run in 2020 on the economy,” Boltansky said. “That main pillar leads me to believe we’ll have some sort of detente or thawing in the relationship between the U.S. and China on trade before election day.”

“It will get worse before we get there,” he said. “But I do believe that’s the end game.”

Read more:

Home Depot CFO: We don't see a recession

Why the markets need to give Jerome Powell a break

Recession warning: RV sales hit the skids

Bonds, yields, and why it matters when the yield curve inverts

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.