US President Donald Trump’s “America First” policy – to lower imports, increase domestic production and jobs and reduce income inequality – will adversely affect countries that sell to the global “importer-in-chief”.
In its latest report on global trade, “Global trade: Trade first!”, released yesterday it said Malaysia could also be hurt by US protectionist measures against China, Mexico, Germany and Japan.
This is because Malaysia supplies intermediate products to these targeted countries and would likely see knock-on impacts.
According to a report in The Edge, other countries facing the same fate include Germany, Ireland, Vietnam, South Korea, Singapore and Japan.
“President Trump’s rhetoric, including since taking office, suggests that protectionism is likely to rise, particularly targeting China, Mexico, Germany and Japan. However, the impact on these countries would differ sharply,” said Standard Chartered.
“For each of these economies (China, Mexico, Germany and Japan), the extreme case of a complete loss of exports to the US would lower their GDP by 4.7%. Canada follows closely behind, with a sizeable 4% of GDP impact.
“Other countries that would see a significant impact on their GDP include Germany, Ireland, Vietnam, South Korea, Singapore, Malaysia and Japan,” it added.
However, it noted that tariffs imposed on particular products from a country offered opportunities to other countries to increase their exports of that product, according to The Edge.
“A number of Asian countries could step up direct supply of these products, offsetting any losses resulting from lower intermediate goods exports (through the supply chain).
“So South Korea, Taiwan and Malaysia could ramp up direct exports to the US,” the report said.
Standard Chartered however dismissed the possibility of a full-blown 1930s-style global trade war.
“Markets are worried about this (global trade war), but we do not expect history to repeat itself, as the world economy is structured differently now.”
The report said weak demand had inhibited the global trade recovery since the 2008-2009 global financial crisis.
“US demand now drives global import demand again, but protectionism could undermine this progress.
“Near-term, replacement candidates are few, and a period of slow trade growth could set in if protectionism escalates and weakens the likelihood of stronger services trade growth,” it added.
Standard Chartered said, given this situation, Asian economies, particularly China, were better suited to replace the US over the medium term.
“China has already begun to assume a greater role in global trade. While the US and Europe remain the largest consumers of Asian supply-chain products, China is slowly rising in importance as a final demand destination.”