As the U.S.-China tariff battle increasingly heats up, analysts from J.P. Morgan and Morgan Stanley say it's looking likely that there will not be any trade deal coming out of the G-20 summit in Japan this month.
The summit has been cast as a possible opportunity for the opposing sides to ink a deal, with market watchers expecting that both Presidents Donald Trump and Xi Jinping would be in attendance.
But Chinese Vice Commerce Minister Wang Shouwen would not confirm at a press conference Sunday whether Trump and Xi would actually meet at the meeting at the end of June. He said only that China will send representatives to those coming events in Japan.
But on Monday, experts from both J.P. Morgan and Morgan Stanley told CNBC that the rhetoric from both sides in recent weeks has worsened to a point where it's appearing improbable that there would be a deal — at least in the short term.
"My personal expectation is no deal. If you look at the position on both sides, you see a significant reduction in degrees of freedom — the commentary out of the Chinese side for specific, effectively pre-negotiating points that must be met," said James Sullivan, head of equity research for Asia excluding Japan at J.P. Morgan.
He continued: "If you look at the U.S. side — very, very hawkish tone — not just from the president but throughout the entire administration ... I think that makes it very difficult to see a deal on a short-term basis."
Jonathan Garner, Morgan Stanley's emerging markets strategist, echoed that sentiment.
"It's looking more likely no deal than deal at this point," he said.
Last month, Trump announced that tariffs on $200 billion worth of Chinese goods would go up from 10% to 25%. The U.S. has also begun looking into whether $300 billion of other Chinese goods will be subject to tariffs. Finally, the U.S. put Chinese tech giant Huawei on a list that essentially prevents it from conducting business with American companies.
In turn, China responded with its own levies and Chinese Vice Foreign Minister Zhang Hanhui said last week that provoking trade disputes amounted to "naked economic terrorism." Chinese media also warned the U.S. that Beijing could cut off industrially significant rare earth minerals as a retaliatory measure in the escalating trade battle.
The cost of the trade war could be felt by both countries soon if trade tensions take a turn for the worse, Garner added, projecting that Beijing and Washington would have to tweak their monetary policies in response.
"We think that both China and the U.S. are going to have to ease more if the current trade tensions continue or escalate further," he said.
In the most adverse scenario, the trade war could drag down many other countries, Garner said, echoing his firm's prediction on Sunday that the trade war could send the global economy into recession in less than a year.
"The stakes are extremely high now, and with each day and each incoming data point ... the global economy is losing momentum really quite rapidly," he said.
In a note published by Morgan Stanley on Sunday, the bank said that the outcome of the trade war at the moment "is highly uncertain" but warned that, if the U.S. follows through with 25% tariffs on the additional Chinese imports, "we could end up in a recession in three quarters."
In particular, investors are not fully appreciating the effect of reduced business spending, which could drive down global demand, according to the bank.
J.P Morgan's Sullivan also warned on Monday that uncertainty about what the trade war will mean for supply chains "will drag significantly" on spending and profitability around the world.
— CNBC's Evelyn Cheng and Tucker Higgins contributed to this report.