U.S. President Donald Trump, left, and Xi Jinping, China's president, shake hands during a news conference at the Great Hall of the People in Beijing, China, on Thursday, Nov. 9, 2017.

Qilai Shen | Bloomberg | Getty Images

U.S. President Donald Trump, left, and Xi Jinping, China’s president, shake hands during a news conference at the Great Hall of the People in Beijing, China, on Thursday, Nov. 9, 2017.

The U.S. and China could remain locked in an escalating trade war for quite a while, and analysts have low expectations for any progress at a much touted meeting between President Donald Trump and President Xi Jinping at the end of the month.

G-20 in Buenos Aires would provide an improved atmosphere for trade talks to resume. But analysts remain skeptical and say trade tensions could get worse before they get better, with even more tariffs coming in 2019.

Trump said he spoke with Xi last week and China wants to make a deal, but strategists said it still seems that there are no substantive talks and the two sides have not found common ground. Xi, meanwhile, spoke at a conference Monday and while he did not directly mention the U.S. by name, he insinuated that there is a major rift between the two countries.

“I’m glad Trump talked to Xi last week. I think the atmospherics have gotten a little bit better, but frankly I think Trump said that because he knew the market would be pleased, and he wanted to see the markets rally ahead of the election,” said Greg Valliere, chief global strateigst at Horizon Investment. “Xi said something kind of critical over the weekend to indicate we’re a long way away from a deal.”

Xi spoke at the opening ceremony of China’s International Import Expo, an event where China has been hoping to show that it is sincere about boosting imports and elevating its consumer in the global trade arena. But as trade tensions with the U.S. rise, China’s exports have also risen, with the trade gap with the U.S. a record $40.2 billion in September.

“As globalisation deepens, the practices of ‘law of the jungle’ and ‘winner-take-all’ are a narrowing road that leads to a dead end,” said Xi. “Inclusion and reciprocity, win-win and mutual benefits is the widening and correct path.” Xi also said China would support reforms to the World Trade Organization and improve protection for intellectual property, two ideas supported by the U.S.

Trump, in his comments Friday, said China’s economy is hurting and that it wants a deal. But if one can’t be reached, the president said he’s ready to move ahead with another $267 billion in tariffs. China’s stock market has been sliding, and Shanghai stocks are off by about 20 percent year-to-date. Service sector data, released early Monday, showed slowing orders, with the Caixin/Markit services purchasing managers’ index falling to 50.8 in October from 53.1 in September, the lowest in more than a year.

“There’s nothing in Xi’s speech that shows he’s about to capitulate. I think what happened is Xi and China made a deal with [Treasury Secretary Steven] Mnuchin earlier this year to reduce the trade deficit. China would buy more goods including agriculture and energy and then Trump said we don’t have an agreement. I think that soured the relationship,” said Marc Chandler, Bannockburn Global Forex chief market strategist. “[China] is seeing this as a long-term protracted struggle and because of that they’re trying to find ways around it.”

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