The global growth will take a hit of as much as 30-40 basis points if the re-escalation of trade tensions between two superpower economies the US and China persist, Morgan Stanley said in a report this week.
The global growth will take a hit of as much as 30-40 basis points if the re-escalation of trade tensions between two superpower economies the US and China persist, Morgan Stanley said in a report this week. The global brokerage house said the re-escalation would be temporary as the market weakness would help bring both sides together. However, it reiterated if the trade tensions continue then the global growth would get most affected via capex and corporate confidence, as can be seen from the last round of escalating trade worries.
“Against that backdrop, global growth decelerated by 80 bps even though we did not reach the scenario where 25% tariffs were imposed fully,” said Morgan Stanley. The brokerage firm fears if the trade conflict persists between the two economic giants, there may be deeper global slowdown.
However, Morgan Stanley expects some policy response from China and the Fed as the downward pressures on growth build but still it cautioned against the risks to global growth from here. “The risk to the global cycle would be if the damage to corporate confidence gets entrenched, spending does not pick up and a negative feedback loop of weaker global growth and tighter financial conditions could unfold,” Morgan Stanley said.
Today, the US raised tariffs on Chinese goods worth $200 billion even as the second round of trade talks are going on with China in Washington. The consumer products on which the tariffs have been increased to 25 percent from 10% also include cell phones, computers, clothing and toys. China has also threatened to take necessary countermeasures in a bid to retaliate to the increased tariff.
On Sunday, the US President Donald Trump had threatened to impose tariffs on Chinese goods of $200 billion on Friday after China backtracked on its commitments in trade deal. The tariffs could be raised to 25% from the current rate of 10% as both the US and China have not been able to iron out their differences in reaching a trade deal.