Growth policies are less effective without a US-China ‘phase one’ trade deal - Morgan Stanley

An increasing number of governments and central banks are taking steps to boost economic growth — but those policies will be less effective if the U.S. and China don’t reach a “phase one” trade deal, a Morgan Stanley executive said.

The absence of that deal will prolong economic uncertainty globally, said Gokul Laroia, co-chief executive of Asia Pacific for Morgan Stanley. That uncertainty has caused businesses to hold back plans to invest and expand — a major reason behind slowing growth in many countries.

“A deal coupled with policy is much more impactful than just policy. And the effectiveness of whether it’s monetary or fiscal (policy) is a lot lower when you don’t have a trade deal done, and when you have an inherent amount of uncertainty hanging over the corporate world not just in Asia, but globally,” Laroia told CNBC.

The U.S. and China agreed to work towards a “phase one” deal. But Washington and Beijing have since sent mixed signals about whether or not the partial deal would be done.

Laroia said he’s optimistic that a “phase one” deal will be reached, which will benefit the economy and financial markets.