Making this prediction, CIMB Securities senior economist Vincent Loo said Trump’s return to the White House solidifies a trajectory of heightened tariffs and protectionist policies, including a proposed 10% tariff on all imports and a specific 60% tariff on Chinese goods.
“With escalating US-China trade tensions, Malaysia could see increased export demand from US companies looking to source products outside China, creating export growth opportunities in high-value sectors,” he said in a research note today.
Loo said foreign direct investment (FDI) in Malaysia is expected to rise as companies seek stable manufacturing bases in the Asean region, with the country emerging as a competitive destination owing to its infrastructure and relatively lower production costs.
“However, renewed trade uncertainty may lead to risk-off sentiment in financial markets, prompting investors to seek safe-haven assets, supporting a stronger US dollar and accentuating capital outflows from emerging markets, including Malaysia,” he added.
He noted that increased tariffs on Chinese goods may prompt US companies to shift sourcing from China to Malaysia, increasing demand for Malaysian exports of semiconductors and electronic components.
However, if trade tensions escalate, overall demand might decline, curtailing exports to both the US and China.
Similar to electrical and electronics (E&E) exports, Loo said Malaysia’s machinery and appliance exports stand to gain as the US seeks alternatives to Chinese products.
“However, heightened tariffs and trade barriers could raise costs and reduce global trade demand, impacting Malaysia’s trade volume,” he added.
Loo added that Trump’s “America First” energy policy, with an emphasis on boosting US production, could lower global energy prices, diminishing the value of Malaysia’s mineral fuel exports.
CIMB Securities maintained its forecast of Malaysia’s gross domestic product (GDP) at 5.2% for 2024 and 5% for 2025 although its export-import outlook may face upside risks owing to increased volatility of trade flows and fluctuations in foreign exchange levels.
“We continue to expect an external demand recovery driven by the global tech upcycle, as well as strong domestic spending supported by robust investments and resilient consumer spending,” said Loo.
He said the ringgit is anticipated to experience near-term volatility, but this would ultimately hinge on the US Federal Reserve’s policy decisions.
Meanwhile, Hong Leong Investment Bank (HLIB) said the proliferation of the China Plus One strategy would benefit Malaysia’s electronic manufacturing services sector as brand owners shift or diversify their manufacturing from China, while increased FDI to Malaysia would benefit sectors such as construction, industrial property and real estate investment trust.
It also said more economic fluidity and market volatility are expected under a Trump presidency given his rather confrontational “shoot from the hip” style.
“This isn’t entirely a bad thing, noting that Malaysia did benefit from the ongoing US-China trade war.
“However, the key risk this time around is if he drags the entire world into it as well with his proposed blanket 10%-20% tariff – the US was Malaysia’s third largest export destination in 2023 at 11.3%,” it added.
For now, the investment bank has said it is maintaining its end-2024 FTSE Bursa Malaysia KLCI target at 1,700.
“Our investment themes on tourism recovery, energy transition, Johor’s developmental reinvigoration, and disposable income boosting measures should be fairly insulated after the US election outcome – while trade war beneficiaries could see revived interest,” said HLIB.