U.S.-China Trade War Likely to Last: Analyst

How much it will cost U.S. manufacturers to move their assembly work out of China "depends on the product," he said, noting that some estimates suggest it will costs 25-50% more that what they pay today for certain higher-end products. When you levy a 25% tariff, for some high-end products "it might be a wash to make it inside the United States."

But Mills said: "For other products, the technology, the expertise, the work force only really exists in China, so some companies that we've spoken to said there's really no short-term alternative to production [there]."

'No Hard Cap'

It had been commonly believed before last week that Trump was going to cap the tariffs at 25%.  Now, though, it seems there's actually no "hard cap" at all, according to the veteran analyst. The general view among companies seemed to be that while a 10-15% tariff was "unfortunate," it could be absorbed, but if it goes to 25% or higher, "that's where it becomes a real problem," Mills said.

It's possible that the Trump administration could get "some sort of weak deal" done soon, Mills said. But he's doubtful because of what seems like a "kind of game-changer moment — at least in the last six months," when Trump claimed that China had walked away from negotiations and then, a week later, threatened to put tariffs on Mexico even after a deal supposedly had been negotiated with that country.

At that point, "there was a big shift in China, where they really started to view or got a confirmation of the view that Trump is not a reliable negotiator," he said. Trump's claims since then regarding China's position appear to have strengthened the Chinese government's lack of trust in the U.S. leader, according to Mills' sources.

"Right now on the Chinese side, what we see is that about a year to year and a half ago, China would have loved to write a check to get out of this and move on," he explained.

"Today, they're not even willing to kind of entertain even some of the lower-hanging fruit" that's been identified during the conflict, Mills said. "I think that has to be a real concern."

Meanwhile, Morgan Stanley Chief Economist Chetan Ahya has warned that the global economy could fall into a recession six to nine months after the U.S. and China enforce their new round of tariffs, according to a CNN report Monday. (Morgan Stanley didn't immediately respond to a request for comment.)