Hedge fund manager Kyle Bass is doubtful a trade deal between the U.S. and China could be reached and believes the Federal Reserve's rate cuts are less effective these days.

"Every deal that the Chinese have signed up with us since their inception into the WTO since 2001, China never lives up to their promises," the founder and chief investment officer of Hayman Capital Management said on CNBC's Closing Bell on Thursday.

"At some point in time, one of our administrative officials is going to hold their feet to the fire and this is kind of a battle of cultures because the Communist Party doesn't want to submit themselves to anything measurable or enforceable. I don't think an agreement could be had," Bass said.

American and Chinese negotiators will meet for face-to-face talks next week after the negotiations fell through in May. Treasury Secretary Steven Mnuchin said there are a lot of issues for the two countries to work out.

Investors are now betting that the Fed is going to cut interest rates at its policy meeting next week and that there will be more easing this year to sustain the record-long economic expansion. However, Bass said the central bank's primary tool has lost some of its mojo.

"We believe rate cuts are less and less effective once you've been at a zero rate bound...They will have less efficacy. I think in early 2020, you are just going to see softness in the U.S. economy. We might have shallow recession, but if we do and we will immediately go to zero rates," Bass said.

In such an environment, Bass recommends buying long-duration assets including long-term bonds and real estate.

"The best way to defend your investments in an environment like that is to buy long-duration assets, i.e. you want to own apartments, you want to own office buildings and you want to own long bonds," Bass said.

He also said the U.S multinational corporations with high dividend yields will outperform. Junior preferreds of Fannie Mae and Freddie Mac is his "highest conviction position," noting that they are trading below par.