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El-Erian: A 'Phase 2' trade deal will be hard to come by

Heidi Chung

The U.S. and China are scheduled to ink a “phase one” trade deal next week, but a “phase two” deal could be much more challenging, according to Allianz Chief Economic Adviser Mohamed El-Erian.

“I think phase two is going to be really hard to achieve,” El-Erian said Thursday on Yahoo Finance’s On The Move. “I'm not a buyer that phase one automatically means a solid foundation, a solid stepping stone to phase two.”

For more than a year, the ongoing trade war weighed heavily on both investor and business sentiment, and even as stocks soared to record highs, it was a bumpy ride along the way as the U.S. and China went head-to-head in a tariff battle.

Nevertheless, the two sides agreed on the first phase of a trade deal, and China announced Thursday that Chinese Vice Premier Liu He will be visiting Washington next week to sign the phase one deal into effect.

U.S. President Donald Trump and China's President Xi Jinping make joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst

After indicating that negotiations for a phase two deal would follow shortly after signing the phase one deal, President Donald Trump told reporters Thursday at the White House that he may wait to negotiate a phase two trade deal until after the 2020 presidential election.

“We’ll start negotiating right away Phase Two. It’ll take a little time,” Trump said. “I think I might want to wait to finish it till after the election because by doing that I think we can actually make a little bit better deal, maybe a lot better deal.”

Phase one is more of a truce and a ceasefire and doesn’t really address the complex issues, according to El-Erian. And “phase two is a lot more complicated than phase one.”

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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