Context matters if we’re talking about the nuances of the english language.
Cute: Appealing in a pretty or endearing way. Cute: Sexually attractive.
In the right context it’s a none issue to call a child cute in an endearing way. This is very common.
If you say it meaning the second definition, you should be locked up in jail.
Obviously in this scenario its fine, because you where asked incontext of an endearing manner (I hope), so the repsonse would also be in an endearing manner (i hope).