US tariffs invites reciprocal action, creating uncertainty

The United States appears to be using tariffs to seek reciprocity in its trade relations, in a bid to reduce its trade deficit. In our (Morgan Stanley's) view, this poses challenges for Asia, given that seven of the top 10 economies with the largest trade surpluses against the US are in Asia.

It also adds uncertainty to the business cycle, as we expect trade tensions to weigh on corporate confidence, affecting capex and trade.

In efforts to guess what exactly US President Donald Trump will announce on Wednesday in the form of global reciprocal tariffs, some details have emerged about what he could seek from the US' trade partners to reduce its trade deficit.