Economic Report 2019: Impact of US-China trade war

Posted on 05 November 2018
 

Source: The Star Online
MALAYSIA'S exports and its GDP will likely be impacted over 2018 to 2020 due to the fallout from the on-going US-China trade war, which are the country’s two major trading partners, and this could decline further if the spat continues over the next few years.

Almost 50% of Malaysia’s exports are incorporated into China’s final products which are then exported to the US.

 
“Based on this assumption, Malaysia’s exports will likely decline by 0.08 percentage points, while the GDP by 0.02 percentage points over 2018-2020,” the report says.

If the trade war escalates and drags down global output by 0.4 percentage points by 2020, the Malaysian economy could lose up to 0.7% percentage points.

This is based on an econometric analysis by then Finance Ministry that indicates a 10% drop in global growth will reduce Malaysia’s GDP by 14%.
 

To recap, China has been Malaysia’s largest trading partner for nine years accounting for 13.5% of RM126bil of total exports in 2017.

The US is the third largest export destination accounting for 9.5% or RM88.7bil.

The tariffs imposed by the US on Malaysia  products such as solar panels, washing machines, steel and aluminium is “relatively minimal” – 0.8% of total exports or US$7.3bil in 2017.

However, exports which will be indirectly  impacted following the US$250bil worth of Chinese products account for 12% of Malaysia total exports or RM108bil (US$25.1bil).

Bulk of the products are E&E, office machines and automatic data processing equipment as well as electrical machinery and appliances. Other products are crude oil and gas, metal ores, chemicals, plastics and other rubber products.

 



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