Mohamed El-Erian, chief economic adviser at Allianz, gave his view on the state of the U.S. trade war with China on Tuesday.
"What the market has priced in is the following: that the tit-for-tat continues, but ultimately it doesn't lead to a full-blow trade war, that we get still free but fairer trade. Is there a left tail? Sure there is. I think what the market hasn't realized yet is that there is a right tail ... when people realize that at the end of the day, the U.S. will prevail, because it is a less open economy, because it's a more dynamic economy, that ultimately you may end up in a position where the U.S. in global economic terms is better off."
El-Erian also forecast that the Federal Reserve will back off of its intention to hike interest rates four times this year and that select emerging markets will become highly attractive.
Watch the interview:
