China's economy will take a big hit as firms relocate all or parts of their supply chains due to an escalating trade war with the U.S., Howard Lutnick, chairman and CEO of financial services company Cantor Fitzgerald, said Wednesday.

The world's two largest economies increased tariffs on one another last month, with the U.S. making the first move by increasing duties on $200 billion worth of Chinese products from 10% to 25%. China announced plans to raise tariff rates on $60 billion in U.S. goods.

The trade dispute, which has rattled financial markets and threatened to drag on the global economy, is pushing U.S. multinational companies doing business in China to relocate their factories and adjust business strategies for their supply chains, according to a survey by Bain and Company published earlier this year.

President Donald Trump said last month his tariffs on Chinese goods are causing companies to move production out of China and into places such as Vietnam.

Once those supply chains move, China won't be able to get them back, argued Lutnick, also chairman and CEO of BGC Partners, a brokerage that was spun off from Cantor in 2004.

"I think each 6 months [of the trade war] will cost China 1% of GDP," Lutnick told CNBC's Bob Pisani. Therefore, "they'll try to make a deal with the [Trump] administration before" the 2020 presidential election, he added.

Meanwhile, the U.S. economy will do just fine, Lutnick said. He is predicting U.S. growth of about 2% through the end of this year, roughly in line with the Congressional Budget Office's projection of 2.3% in 2019 but below the Trump administration's forecast of 3.2%. Lutnick doesn't expect a recession.

"The economy is not stopping. It just doesn't feel that way to me," said Lutnick, who became CEO of Cantor in 1991 and chairman as well in 1996.

Lutnick joined Cantor in 1983. He is known for rebuilding Cantor after the Sept. 11, 2001, World Trade Center terrorist attacks. The company lost more than two-thirds of its then 960 New York-based employees, including Lutnick's brother. Cantor and its affiliates now have more than 10,000 employees globally.