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Tariffs Could Drag on Growth in Asia as Well as U.S.
- 2025/04/25
- 再生時間： 11 分
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Our U.S. and Asia economists Michael Gapen and Chetan Ahya discuss how tariff uncertainty is shaping their expectations for these economies over the second half of 2025.Read more insights from Morgan Stanley. ----- Transcript -----Michael Gapen: Welcome to Thoughts on the Market. I'm Michael Gapen, Morgan Stanley's Chief U.S. Economist.Chetan Ahya: And I'm Chetan Ahya, Chief Asia Economist.Michael Gapen: Today we'll discuss some significant changes to our Asia growth forecast on the heels of tariffs. As well as how the U.S. economy is reacting to the changes in the global trading environment.It's Friday, April 25th at 8am in New York.Chetan Ahya: And 8pm in Hong Kong.Michael Gapen: So, Chetan, since the last time we were both on the show, it appears that we are headed towards at least some de-escalation of trade tensions. Just last week, you wrote in your report that the tariffs on China are too prohibitive for any trade to take place – and that you expected some dialing down of the escalatory action. And this week the administration started to talk about easing tariffs on China significantly.Considering all the events since April 2nd – and it's felt like a lot of events since April 2nd –where does it leave you in terms of how you are thinking about the outlook?Chetan Ahya: So, Mike, that's right. You know what we thought was that the current level of tariffs that the U.S. has on China and what China has on the U.S. means that effectively there are no transactions possibleBut look, even after those tariff rates are going down, we are still expecting it to be in the range of around 60 per cent. And that would still be relatively high level of tariffs. If I were just to translate this into what it means for the whole region? So, for the whole region, the weighted average tariff will still be around 32 per cent. And remember this number was close to 5 per cent in early January.So, we are talking about a huge amount of uncertainty related to this tariff path and the tariff level itself is going to remain somewhat high.And so, with that concern on uncertainty, we are expecting a region's investment growth to be affected significantly, taking down region's growth lower.Michael Gapen: So, Chetan, I was looking over your growth forecast and noticed that you have a sharp step down in growth from the second quarter of 2025 on. Can you walk us through these revisions in particular?Chetan Ahya: So yes, we have changed our forecast and what we are now seeing is in terms of growth path is that Asia's overall GDP growth will slow from 4.8 per cent that we saw in fourth quarter of last year, to around 3.6 per cent by fourth quarter of this year.And for comparable time period, China's growth will slow from 5.4 to 3.7 [per cent]. So that's another meaningful step down for ChinaMichael Gapen: What do you think Asian economies can do to counteract the impact from tariffs at this point?Chetan Ahya: So, we expect the policy makers in the region to take up both monetary and fiscal policy easing. But, you know, despite that policy easing effort, you will still see that meaningful growth drag. So, for China, we think it'll be the fiscal policy that will do the heavy lifting. Whereas for Asia ex-China is going to be more monetary policy that will do the heavy lifting.And in terms of the exact magnitude, we're expecting 50 to 150 basis points depending upon the economy in the region in form of rate cuts. And specifically on China; on the fiscal policy, we expect them to take up about 2.5 per cent of GDP increase in fiscal deficit in form of investment in infrastructure, as well as some programs for supporting consumption spending.Michael Gapen: So Chetan, it sounds like a lot of monetary and fiscal policy easing and support is coming from the Asian economies. But I guess the bottom line is that you don't think it would be sufficient to fully counteract the impact from tariffs. Is that right?Chetan Ahya: That's right Mike. And let me come to you now and get your thoughts on how you see the development of the tariffs, et cetera, affecting the U.S. economy. You've already recently characterized your view on the U.S. economy as still living on the edge. What's driving this view?Michael Gapen: It's a way that we were trying to communicate that, you know, we don't see the economy at the moment, falling into a recession, but we think it's close. If we thought that the effective tariff rate was going to stay where it was -- or where it is -- roughly around 18 per cent, then we would have a much more negative view on the outlook. And we do expect the effective tariff rate to come down for all the reasons that you suggested there. And there's openings for that, to happen. And that's where the conversation has been going in recent days.And so, I think there's a tension between how much uncertainty can be reduced on one hand. And then on the other hand, how quickly volumes in the economy, activity in ...