‘Malaysia to have short-term advantage in US-China trade war’
KUALA LUMPUR: Malaysia will have a short-term advantage in the trade war between the United States and China.
The conflict is expected to result in trade diversions but only for certain products.
Economists said Malaysia would benefit from the trade diversions, mostly in the agriculture, semi-conductor and technology sectors, as the countries involved in the trade dispute might look at alternative export destinations.
Sunway University Business School economics professor Dr Yeah Kim Leng cautioned that the trade war would dampen demand and result in long-term negative sentiments.
“We are seeing a slowdown in global economy. Although the US tariffs on US$34 billion (RM138.5 billion) worth of Chinese imports are still relatively small, the next round would be quite sizeable, with targeted tariffs on US$200 billion worth of Chinese goods,” he told NST Business yesterday.
He said the escalation of the trade war would have a spillover effect globally through the supply chain.
He added that China would bridge the gap, particularly with Malaysia and other countries, in a bid to protect itself and mobilise support globally.
“It is reasonable for the Chinese government to push for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“CPTPP will help to push back some of US President Donald Trump’s anti-globalisation and anti-trade policies.”
Yeah said Prime Minister Tun Dr Mahathir Mohamad’s visit to China this month could also reaffirm the two countries’ commitment to free-trade agreement and boost Malaysia’s trade to China, particularly the export of palm oil products.
“China will also look at alternative sources of vegetable oil to replace soyabean oil. This could also be an opportunity for both countries to strengthen trade dimension in the event of full-blow trade war.”
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the recent survey by the US Institute for Supply Management showed that various manufacturing industries in the country were facing difficulties coping with the rise in import tariff.
“For instance, the computer and electronics industries have indicated they are working on contingency plans.
“As for plastic and rubber products, the tariff has resulted in increased Customs inspection time on imported raw materials from China.”
He said the tariff issue had also given rise to efficiencies.
“It may also cause other issues such as currency and non-tariff wars. All this could undermine economic activities as the global economy is interrelated in terms of value chain.
“We have seen the global purchasing managers index for the manufacturing sector declining to 52.7 points last month from 54.4 points in December last year, reflecting pessimistic view among the manufacturers,” he added.
Affin Hwang Capital senior director and equity capital markets head Arvin Chia Yew Kim said Malaysia was well-positioned to benefit from the trade dispute.
“It is possibly a positive way for China to develop its industries to compete globally under its ‘Made in China 2025’ initiative for some key industries, like semi-conductor and high-technology.”
Chia said China was looking at various investments to drive in those industries in the country and overseas.
“Malaysia has positioned itself well and could encourage more investments from China.”
Chia expects interesting announcements to be made by Dr Mahathir during his visit to China, adding that there might be negotiations behind the scenes between China and Malaysia’s billionaire representative, Robert Kuok.
“I believe there will be a positive outcome. Malaysia is strategically very important to China in terms of location and its role in the region due to geographically and historical perspectives,” he added.
MIDF Research chief economist Dr Kamaruddin Mohd Nor said Malaysia could benefit from incoming investments by leveraging its comparative advantage to navigate trade barriers, such as tariffs.
“This will structurally alter the global value chain in the medium term which could be beneficial to Malaysia. The ongoing trade tensions will eventually change the global trade landscape,” he said.