KUALA LUMPUR, Malaysia RAM Rating Services Bhd (RAM Ratings) expects Malaysia’s export growth to decelerate to 3.3 per cent in August from 9.4 per cent in July, on the back of more cautious sentiment amid escalating trade tensions between the United States (US) and China.
In a statement today, it said the imposition of the second round of import tariffs by the US and China on Aug 23 was pertinent to Malaysia due to its impact on the semiconductor sector.
The risk to trade momentum was heightened even further when the US imposed a third round of tariffs on Chinese imports valued at US$200 billion on Sept 24.
The rate is set to increase to 25 per cent in January 2019 from the initial 10 per cent, RAM Ratings said, adding that electrical and electronic (E&E) products constituted 36.7 per cent of Malaysia’s total exports last year.
Electronic components under both the US and China’s set of tariffs, respectively, constitutes 6.8 per cent and 16.4 per cent of Malaysia’s overall exports, respectively, it said.
While global trade would likely face some dampening on its momentum in the short run amid the trade war, producers in the region stand to gain from the demand diversion, as firms in the economy rejig their supply chains down the line, said the rating agency.
For Malaysia, the biggest potential gain comes from the trade diversion effect of the E&E sector which could boost overall export demand.
Malaysia is a country that is highly competitive in terms of revealed comparative advantage to benefit from the trade diversion from the US’s second round of tariffs on China, which places heavier focus on semiconductors, it added.
Source: NAM News Network