KUALA LUMPUR: Malaysia is looking at two key events this week that will have negative and positive bearings on its trade with other countries.
First, the US will formally announce the move to impose tariffs on steel and aluminium imports. Second, the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be signed on March 8 in Chile.
Analysts said President Donald Trump’s planned steel and aluminium tariffs may lead to possible global trade war as other countries especially China may retaliate.
As investors worried that the US move would derail global growth, the Malaysian economy is not expected to be spared totally from the setback, they added.
On the other hand, they said the new CPTPP should be positive as the revised agreement offers more flexibility to Malaysia and 10 other signatories.
Affin Hwang Capital said in the short term, the potential tariffs should create some uncertainties on global trade and production, as protectionist trade policies are likely to hurt growth momentum.
“We believe the growth momentum of the global economy will be affected, attributed partly to the negative impact of some disruptions to the global trade. Similarly, we also expect no emerging market can escape fully over the global slowdown and financial market volatility and global sentiment towards risk,” the firm said today.
Malaysia’s exports of steel and aluminium products to the US, Affin Hwang noted, accounted for 1.5 per cent of the total exports to the latter and only 0.15 per cent of the former’s overall exports last year.
AmInvestment Bank Bhd said while Malaysia does not export much steel to the US, the implications of the tariffs could be wider as it may add up to 40 million tonnes of steel supply to the global market.
Malaysia’s total trade jumped 14.9 per cent to RM156.01 billion year-on-year in January with exports growing at a faster pace, beating analysts’ expectation.
Exports posted a stronger growth than imports during the month, expanding 17.9 per cent to RM82.86 billion.
On CPTPP, Affin Hwang said there were some encouraging effects from the revised Trans Pacific Partnership (TPP).
“With the suspension of the 20 items in the CPTPP, we believe that the revised TPP agreement will be flexible for participating countries. Some market observers also noted that the CPTPP will likely be more acceptable to the public compared to the original TPP guidelines,” it added.
Affin Hwang said the Malaysian government and its CPTPP peers will have the flexibility to make own decisions, laws and regulations in areas such as public healthcare, public education and social services while claims are no longer permitted in relation to investment contracts and approvals.
It also pointed out that under the new CPTPP, Malaysia’s state-owned entreprises are given some flexibility in which all references to the phrase “after signature of this Agreement” has been defined as “after the date of entry into force of this Agreement for Malaysia”.