KUALA LUMPUR: Market analysts have raised concerns following US President Donald Trump’s announcement of expansive new global tariffs.
MIDF Research warns that if the policy triggers a 10% drop in Malaysia’s shipments to the US – which represented about 13% of total exports last year – it could shave 1.3 percentage points off the country’s exports.
If it is assumed the tariff hikes also cause demand from regional economies to weaken, additional 10% declines in exports to regional markets (such as Singapore, Taiwan, South Korea, Vietnam, Japan and even China) could cause overall exports to experience a larger decline of around -5.8ppt, it said in a note today.
The US announced a minimum 10% tariff on all imports, effective today, while imposing additional duties of 10-50% on about 60 nations, effective April 9, including Asean countries.
However, MIDF Research expects a mitigating effect from reduced imports of intermediate goods such as electrical and electronic products, machinery and metal components due to weaker production activity.
“Accounting for lower imports, the net impact on GDP could be up to -1.5 ppt. This means Malaysia could still achieve around +3.0% GDP growth this year, supported by resilient domestic activity,” the research firm said.
It added that the magnitude of the trade and production shock would depend on the shift in final demand and the ability of companies to absorb higher costs.
“We do not expect this temporary supply shock to trigger a sharp global downturn. However, the broader impact on global trade could be more substantial this time, as the latest round of tariffs – dubbed ‘Trade War 2.0’ – now involves more countries beyond the US-China conflict.”
However, MIDF Research said efforts to promote greater trade with other regions, such as BRICS, and within Asean, will partly mitigate the slower demand from the US.
Rakuten Trade Sdn Bhd said many analysts expect the tariffs, if imposed, to have adverse implications on the prospective earnings of Chinese companies.
Except for Singapore (10%) and the Philippines (17%), Malaysia’s 24% reciprocal tariff ranked the third lowest within the Asia-Pacific region, with Cambodia (49%), Vietnam (46%), Thailand (36%) and Indonesia (32%) as the top four targets, the firm said.
UOB Global Economics & Markets Research said for Asian countries, particularly Asean-5, reciprocal tariffs would be relatively easy to manage, since the average rates in those countries hover around 7-8%.
However, product-specific tariff rates, especially in the double-digit range, could cause significant impact to these exporters and their supply chain partners, it said.
