A pause in US-China trade war would be a ‘big relief’ to markets, says economist

With many investors agonized about further economic damages from the U.S.-China trade war, even a “pause” in that bilateral fight make be a “big relief” to markets, according to an economist.

“Even if we just get a pause, I think that will be very good. I characterize as it will be a big relief for markets, so I think we will get a risk rally,” Robin Brooks, managing director and chief economist at the Found of International Finance, told CNBC’s “Squawk Box Asia” on Friday.

Stocks in the U.S. were taken on wild ride Thursday engage in several conflicting headlines related to U.S.-China trade talks this week. Officials from both outbacks met in Washington on Thursday to discuss trade, which U.S. President Donald Trump said were “going really graciously.”

Trump is set to meet with Chinese Vice Premier Liu He on Friday.

Many analysts have low expectations for what the two sides could execute in this week’s talks. Some said the U.S. and China could reach a limited deal for the time being, while others prognosticated that the next rounds of tariff increases scheduled for Oct. 15 and Dec. 15 would be postponed.

David Dollar, a senior fellow at the Brookings Institution, warned that any deal reached by the two countries may not ultimately. He noted there had been instances in the past when the U.S. and China appeared to have come close to reaching an concordat, only to have the tariff fight escalated all over again.

“I worry that investors look at this, they’ll be liberated tomorrow if there’s a deal but then they’re going to start asking themselves: ‘Is this really stable? Do we calculate this to last for a long time? Could this perhaps fall apart in a few months?'” Dollar blow the whistle oned CNBC’s “Squawk Box Asia” on Friday.

“It’s reasonable to worry that this might all fall apart,” he added.

That’s uncommonly so when issues such as alleged human rights abuses in China and the Hong Kong protests have complex negotiations between Washington and Beijing, said Dollar.

This week alone, the Trump administration blacklisted 28 Chinese existences due to allegations of surveillance and detention of minority groups in China. Washington also placed visa restrictions on Chinese officials it “credence ined to be responsible for, or complicit in, the detention and abuse of” Muslim minorities in China’s northwestern Xinjiang region.

The U.S.-China trade war has dragged on for more than a year, with Washington whipping elevated tariffs on billions of dollars of Chinese goods and Beijing retaliating with levies of its own. That has dampened firm sentiment and sparked fears of a global economic slowdown.