Economist Lee Heng Guie said he remains wary about the impact of trade tariffs on global economic growth and trade flows, as well as supply chain disruptions.
PETALING JAYA: As the dust settles on the immediate changes that US President Donald Trump will bring to the region, it is becoming more apparent that Malaysian exports to the United States are seen as vulnerable.
Although this may be mitigated by an eventual reduction in the trade surplus with the United States by increasing imports, economists are still anticipating at least some impact on this front as the trade wars show no sign of abating.
Exports to the United States, Malaysia’s third largest trading partner since 2015, were at a historical high in 2024 according to the Investment, Trade and Industry Ministry (Miti).
These exports registered double-digit growth of 23.2% to RM198.65bil on robust exports of electrical and electronics (E&E) products, machinery, equipment and parts as well as rubber products.
Meanwhile, imports from the United States surged by 42.1% to RM126.26bil last year with the main items being E&E products, machinery, equipment and parts as well as chemicals and chemical products.
Malaysia’s inbound and outbound trade with the United States of RM324.91bil last year made up 11.3% of Malaysia’s total trade.
Miti noted in its statement that the United States is a significant contributor to the nation’s trade performance and economic growth.
The United States government’s Office of the United States Trade Representative had revealed on its website that the goods trade deficit of the country with Malaysia had decreased by 7.6% year-on-year last year to US$24.8bil.
Trade figures for the month of January this year are set to be announced tomorrow.
Executive director of independent think tank Socio Economic Research Centre (SERC) and economist Lee Heng Guie said he remains wary about the impact of trade tariffs on global economic growth and trade flows, as well as supply chain disruptions.
“That said, global technology demand for chips and artificial intelligence-related infrastructures should remain intact to support the E&E sector,” Lee told StarBiz.
“Exports are estimated to grow by 4.5% in January, mainly to reflect festive seasonality of shorter working days, based effects and the front-loaded shipment on the back of trade tariffs policy uncertainty,” he added.
Meanwhile, Nomura Research’s recent estimates in its Asia Economic monthly publication earlier this month revealed Malaysia was the third most vulnerable to any imposition of US tariffs in the wider Asian region.
“Our estimates of Asia’s ultimate exposure to the United States showed that Vietnam is the most vulnerable to higher US universal tariffs, followed by Thailand, Malaysia, Singapore and South Korea,” it said.
For Vietnam, Thailand and Malaysia by sector: these would be most exposed – the E&E, machinery, motor vehicles and other manufactured products; it said.
“In Asia, China is at the centre of Trump’s America First trade policy, but the rest of Asia could soon come in the line of fire too.
“The office of the United States Trade Representative is reviewing China’s circumvention through third countries, which will shine a spotlight on South-East Asia,” Nomura Research added.
For Malaysia, the research house said more than 60% of the country’s exports to the United States are E&E products and that this segment could be adversely impacted.
Nomura Research said trade statistics and export and import figures may not be able to provide a complete picture of trade flows with the United States since Asian economies are an intricate part of global supply chain networks, with both backward and forward integration.
“To capture Asia’s ultimate exposure to the United States, we need to estimate a country’s value-add in its exports to the United States, both directly and indirectly via third countries.
“This concept of value addition is important because, even if Asia is not directly hit with higher US tariffs, it is still indirectly exposed to potential tariffs on other countries due to their backward and forward integration in global value chains,” it noted.
Any significant change in trade policy with the United States is likely to happen in April, after thorough investigations that are now being carried out by the United States government. These include the America First trade policy memorandum which was signed by Trump on Jan 20 and the Reciprocal Trade and Tariffs memorandum that was signed on Feb 13.
The second memorandum will examine non-reciprocal trade relationships in a very broad sense, including not only tariffs but value added taxes, subsidies, digital trade barriers, intellectual property rights, regulatory requirements and exchange rate manipulation.
SERC’s Lee said under the first Trump administration, Malaysia’s exports had benefited from trade diversion effects.
“However, under this second Trump government, the risk of blanket and reciprocal tariffs could moderate the trade diversion effects,” Lee noted.
“Based on these factors, it appears that a complicated global supply chain for many products could prove difficult to intervene in simple or broad terms,” he added.
