The Trouble with Tariffs: Impact of China-US trade tensions on the Malaysian economy
Updated 18:37, 14-Aug-2018
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So many in Malaysia worry about the impact of the trade tensions between the world's two biggest economies. But others, including the Malaysian prime minister, who is due to visit China later this month, think it could have a positive effect. Rian Maelzer reports from Kuala Lumpur.
It's Malaysia's golden crop. Palm oil exports earn the country around 10 billion dollars a year, with China the number 2 buyer behind India.
And some analysts believe the palm oil industry could be one of the beneficiaries of the US-China trade dispute, with China imposing a 25 percent tariff on US soya imports.
ALAN LIM SEONG CHUN MIDF RESEARCH "The US-China trade dispute will ultimately benefit palm oil price, this is due to our belief that palm oil exports to China should increase due to the replacement of soya bean oil. Both commodities are used as substitutes for each other in the food industry."
Malaysia's prime minister Mahathir Mohamad and some economists say Malaysian industry and foreign direct investment could also benefit from the US-China trade clash.
MAHENDHIRAN NAIR, ECONOMIST MONASH UNIVERSITY MALAYSIA "I think there is some windfall benefits to countries in ASEAN, particularly Malaysia, because you'll start seeing the Chinese investments starting to use Malaysia as an intermediate market to penetrate the US market and I think you will see that benefit across ASEAN."
That approach may not be enough to avoid the ramifications of US protectionist measures, as the solar industry illustrates. Over the past few years, Malaysia has become one of the world's biggest exporters of solar cells and panels, and the top exporter to the US, thanks in large part to Chinese companies shifting production here. But those exports from Malaysia are now also subject to US tariffs of up to 30 percent.
RIAN MAELZER KUALA LUMPUR "Malaysia is an open, export-dependent economy. And its critically important electronics sector is deeply intertwined with the global supply chain, with many components shipped to China to be assembled into finished products there."
Malaysia's new government has said it remains committed to continued global trade liberalization. So despite some possible upsides for industries such as palm oil, Malaysia will want to see a swift resolution to the trade war between the world's two economic giants. Rian Maelzer, CGTN, Kuala Lumpur.