Morgan Stanley has analyzed the potential impact of reciprocal tariff hikes and economic uncertainty, highlighting both direct and indirect consequences for global trade and financial markets.
The brokerage states that the direct impact of tariff increases will likely be manageable. However, the indirect impact—arising from uncertainty weighing on business confidence—is seen as a more concerning factor that could dampen global economic sentiment.
Morgan Stanley expects domestic policies to remain supportive of growth, ensuring that potential downside risks are mitigated. However, the report notes that additional measures may be required if economic risks increase.
The brokerage points out that the weighted average tariff rate on US imports stands at 8.5%, compared to the 3% tariff rate imposed by the US on other countries, reflecting a tariff imbalance. The uncertainty surrounding trade tensions is likely to lead to greater risk aversion in financial markets.
Another key factor affecting global economic conditions is the strength of the US dollar, which is weighing on central banks’ ability to ease domestic financial conditions effectively. A stronger dollar can tighten liquidity conditions globally, making it more challenging for central banks to stimulate their economies.
Overall, Morgan Stanley suggests that while tariff hikes may have a limited direct impact, the broader uncertainty surrounding trade policies could influence market sentiment and economic growth.
