Trade war may affect M’sia GDP

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) growth rate could be cut by 1.3% over the next two years, if the trade war between the United States and China continues to escalate and eventually leads into a global financial shock.

CIMB Group chief economist Donald Hanna, who warned that the worst is yet to come, pointed out that the worsening trade hostilities would be detrimental to the region and global growth in the longer run.

However, he also indicated that Malaysia and other countries in Asean stood to benefit from the potential short-term opportunities due to the Sino-US trade war.

“In the event of China and the United States imposing tariffs on US$250bil worth of imports from each other, coupled with the threat of a financial shock, the Asean region’s overall economic growth rate is likely to drop by 1.4% in the next two years. Malaysia will be down by 1.3%.

“The largest impact will be in the electronics sector in Malaysia and Singapore, food products in Indonesia, Malaysia and Thailand, as well as wood products in Indonesia and Thailand,” he told reporters at the CIMB Asean Research Institute’s roundtable on “Trade war and its impact on Asean”.

Hanna added that Asean would suffer chiefly through financial effects and trade diversion to Asean is unlikely to outweigh the sheer trade losses from higher US tariffs.

The United States has already imposed additional 25% tariffs on US$34bil worth of imports from China, while an additional US$16bil would come into effect on Aug 23.

In a tit-for-tat reaction, China has imposed a retaliatory tariff of 25% on US$34bil US imports, with tariffs on US$16bil more to be effective also on Aug 23.

US president Donald Trump has warned a further 25% tariff on the next US$200bil of Chinese imports. Both countries are currently negotiating their bilateral trade deals in order to defuse the trade tensions.