Import tariffs will have far-reaching implications on global growth: Report

Import tariffs will have far-reaching implications and though the impact is manageable for now, escalation in this aspect could mean significant downside to global growth, says a report. In recent months the intensity and scope of trade measures have broadened out significantly and against this backdrop, investors have been incrementally more concerned about the impact of trade tensions on global growth.

According to global financial services major Morgan Stanley, global growth would be impacted by just 9 basis points (bps) from the trade measures which have been or are about to be implemented. "A meaningful impact of 21 bps on global growth could result if a 10 per cent tariff was imposed on USD 200 billion worth of China's imports and a 22.5 per cent tariff levied on EU car imports," the report said.

Further, this impact would rise to 31 bps if all imports from China were affected and further to 81 bps in a scenario of a 25 per cent tariff hike across all imports from both China and the EU, the report added. The countries that would be most affected include China, US, Euro area and some major trade partners such as Taiwan, Canada, Korea, Mexico as well as some other smaller European economies.

According to the report, significant escalation will impart material downside to global growth. "The starting point of strong global growth provides some buffer, but significant downside risks could emerge if things escalate significantly from here," it noted.Morgan Stanley used an input-output model to analyse various scenarios and identify the countries and sectors which are exposed.