Trump's threat of tariffs on all Chinese imports would have a 'fairly small' impact if launched

  • The financial markets will turn out fine even if President Trump follows through with tariff threats on all Chinese imports, says Barry Knapp.
  • The founder of Ironsides Macroeconomic Research says, "It is not going to be as disruptive as you'd be led to believe by the market reaction."
  • Wall Street is closely watching Saturday's meeting between Trump and Chinese President Xi at the G-20 summit in Buenos Aires.

The financial markets will turn out fine even if President Donald Trump follows through with tariff threats on all Chinese imports, Barry Knapp, founder of Ironsides Macroeconomic Research, told CNBC Friday.

"It'll have an impact but I think it'll be a fairly small impact," he said on "Squawk Box." "It is not going to be as disruptive as you'd be led to believe by the market reaction."

Many investors have braced for the worst as Trump has shown that he is willing to go to the limit to force concessions out of China. But others have played a wait-and-see approach ahead of Saturday's meeting between Trump and Chinese President Xi Jinping at the G-20 summit in Buenos Aires, Argentina.

In the latest tariff moves, the U.S. levied 10 percent duties on $200 billion worth of goods from China, prompting Beijing to put tariffs on $60 billion worth of U.S. goods.

"I think that trade deals themselves really are overstated in terms of investor expectations and that I don't view it as wildly disruptive to the economy in 2019," said Knapp, formerly a market strategist at investment giants Guggenheim Partners and BlackRock. "Trade and politics are lagging the core economics," he added, arguing "the model where businesses produce in the U.S. to sell in the U.S. was already well underway."

Before departing for Argentina on Thursday, Trump told reporters that the U.S. is "close to doing something with China but I don't know that I want to do it." On Tuesday, the president told The Wall Street Journal it's "highly unlikely" that he would delay January's tariff hike on those $200 billion worth of Chinese goods from 10 percent to 25 percent. Trump even reiterated his threat to put tariffs on the rest of Chinese imports.

Meanwhile, Robert Kimmitt, a former official in the administration of George W. Bush, on CNBC Friday warned Trump to stay on script during Saturday's XI meeting or risk botching any potential trade agreement.

"[Xi] is powerful enough in their system that he could come in with a very well prepared, very well structured agenda," said Kimmitt, a former deputy Treasury secretary and former U.S. ambassador to Germany. "But depending what he hears from the president, he too could call an audible."