See temporary trade dispute globally; India GDP growth move to 7.5-7.7%: Morgan Stanley

New Delhi, Mar 9: 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.
To discuss the impact on other emerging countries showing good growth, CNBC-TV18 spoke to Chetan Ahya, Co-Head, Global Economics & Chief Asia Economist, Morgan Stanley to map the macro situation.
Ahya said currently they are working with a scenario where there could be temporary trade disputes arising due to levy of 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 with other countries is ready for a trade war with them, 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 China GDP growth could slow by 30 basis points to 6.5 percent this year. However, they are constructive on the ability of China to be able to rebalance 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.
On India, he said the current account deficit is within the comfort zone although it has 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 it is 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.