As fears of a global trade war spook economies around the world, steel prices have taken a beating. However, US President said that he will exclude the North American Free Trade Agreement (NAFTA) countries like Canada and Mexico.

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Chetan Ahya, Co-Head, Global Economics & Chief Asia Economist, Morgan Stanley said that they were dealing with a scenario where there could be temporary trade disputes arising due to US tariffs. But, if there is reciprocal tax imposed as mentioned by the US President, then it would result in a protectionist scenario, which could be worse than the trade dispute scenario.

According to him, the cumulative impact of the US measures so far haven’t been very meaningful.

President Donald Trump had earlier said that the US which has nearly USD 800 billion deficit, is ready for a trade war with other countries, if they retaliated against his decision to impose 25 per cent import tariff on steel and 10 per cent on aluminum.

When asked if he expected a big slowdown in China this year, Ahya said that China's GDP growth could go down by 30 basis points to 6.5 percent this year. "However, they are constructive considering the ability of China to be able to re-balance the economy", he added.

The house is also constructive on emerging market growth outlook and the impact of Fed rate hike on them.

"However, if the US 10-year bonds yields were to go up significantly in short term to the tune of 50 basis points or more, then it would temporarily affect the EM asset markets and growth confidence. But underlying fundamentals of the EMs would take charge", he said.

Talking about India, he said that the current account deficit was within the comfort zone although it had widened. "The GDP growth for the economy is heading towards 7.5-7.7 percent".

When asked what he made of raised tariffs on number of India products in the recent Budget 2018, he said that it was not a good idea to put in tariffs unless there is some major national security issue.

He is also of the view that the Reserve Bank of India will not hike rates as growth is recovering. "Moreover, at the current juncture inflation is not a major concern for RBI", he said.

However, they could hike in the second half of 2018.

First Published:Mar 9, 2018 6:59 AM IST