The U.S. and China may fall into a "cycle of retaliation" next year after president-elect Donald Trump's inauguration as he takes action on trade against the world's second largest economy, an economist said on Wednesday.

Speaking to CNBC's Squawk Box, China Beige Book's chief economist Derek Scissors said he wasn't ruling out Trump getting tough on China fast after inauguration on Jan. 20, but his administration may start with something less radical, such as steel tariffs.

"But then China retaliates. Then the Trump people don't like that and they retaliate, and we get a spiral," he said.