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The containers are piled on a ship at the Long Beach Port in Long Beach, California on July 6, 2018, including some of China Shipping, a conglomerate under the direct administration of the State Business Council. China.
Frederic J. Brown | AFP | Getty Images
More equal tariffs in the US-China trade war could pave the way for a global economic downturn, according to Morgan Stanley.
"If the negotiations stagnate, no agreement is reached and the United States imposes tariffs of 25% on the remaining $ 300 billion imports from China." We see the world economy getting worse. head to the recession, "said Chetan Ahya, chief economist and world director of the economy at Morgan Stanley said in a note on Monday.
President Donald Trump has imposed higher tariffs – from 10% to 25% – on Chinese goods worth $ 200 billion. China responded by raising tariffs on US $ 60 billion worth of US goods to 25 percent as of June 1. Trump had also threatened to impose 25% tariffs on an additional 325 billion dollars of Chinese products "soon".
The escalating trade tensions sent shock waves into the financial markets. The S & P 500 has fallen 3.4% since the Trump tariff threat, while the Dow Jones Industrial Average has dropped about 800 points. Sales representatives for Caterpillar and Boeing are under pressure, and chip makers, whose revenues are high for China, have also been hugely successful in the midst of the trade war.
If no commercial resolution was found between the two largest countries in the world, central bankers would adjust their monetary policy to provide support for the deterioration of the economy, Morgan Stanley said.
The economist predicted that the Federal Reserve would bring rates back to zero by the spring of 2020. China would again raise its fiscal stimulus to 3.5 percent of GDP, said Ahya.
"But a reactive political response and the usual delays in the transmission of policies would mean that we might not be able to avoid the tightening of financial conditions and a generalized global recession," Ahya said.
The economist also warned that investors might underestimate the impact of the trade war as China could draw up "non-tariff barriers such as restrictions on purchases". In addition, companies may not be able to fully pass on the higher cost to consumers, said Ahya.
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