What truce? US-China trade war uncertainty still weighing on global growth, Morgan Stanley says as it cuts outlook
- Continued uncertainty over US-China trade war remains an ‘overhang’ on business confidence
- Outlook for global GDP growth now 3 per cent for 2019, 3.2 per cent for 2020
Morgan Stanley has cut its outlook for global growth, saying continued uncertainty over the US-China trade war was having a “more pronounced” effect on business confidence and outlook for economic expansion.
In a research note dated Sunday, the investment bank said it had cut its expectations for global gross domestic growth by 20 basis points to 3 per cent for 2019 and to 3.2 per cent for 2020.
The outlook cut came as US President Donald Trump and his Chinese counterpart, Xi Jinping, agreed to resume trade talks after meeting at the Group of 20 summit in Osaka this weekend, and the US said it would delay adding tariffs to an additional US$300 billion of Chinese imports. But US tariffs of 25 per cent on US$250 billion of Chinese imports are still in place, and are likely to remain in place until a deal to end the trade war is reached.
Morgan Stanley, however, said there was little clarity on whether real progress was achieved at the G20 summit on sticking points that caused talks between the US and China to break down in early May.
“Risks are still decidedly skewed to the downside – escalation, if sustained, will push the global economy into a recession, in our view,” said Chetan Ahya, Morgan Stanley’s chief economist.