Qualcomm's termination of its proposed acquisition of rival chipmaker NXP reveals China has plenty of options in its trade war with the U.S., Yale economist Stephen Roach told CNBC on Thursday.

"It's a reminder that trade wars are maybe not that easy to win," Roach, a senior fellow at Yale and former chairman of Morgan Stanley Asia, said in a "Squawk Box" interview. "And China has a lot of ammunition up its sleeve."

Qualcomm officially terminated the deal to buy NXP after failing to get a decision from regulators in China by its deadline. It will proceed with a $30 billion stock buyback program that the chipmaker had previously said it would implement if it failed to complete the NXP deal.

The deal had been held up by Chinese regulators amid a growing trade conflict between the U.S. and the Asian country. The U.S. and China both instituted tariffs on the other country's goods.

China denied any link between the scrapped deal and the trade war.

Roach urged the Trump administration to understand that the U.S. and China "need each other," saying low-price Chinese imports are needed to "make ends meet" for cash-strapped Americans.

"The Trump administration is clearly focused on isolating China, putting more pressure on China," he said.

American farmers are among the hardest hit by China's 25 percent retaliatory duties on everything from meats and dairy to fruits and vegetables to rice and soybeans.

The Trump administration unveiled a plan this week to offer billions in aid to farmers hit by tariffs, which was quickly condemned by some Republican senators.

Roach said the plan isn't a great strategy, adding it's like "tying one arm behind your back and you use your foot to kick the ball down the field. It's not the best way to make progress on this front."