PETALING JAYA: Given bright prospects of a global trade rebound as economies recover from a Covid-19 pandemic induced slump, experts have yet to dispel the spectre of US-China trade tensions entirely despite the absence of the chief agitator, former US president Donald Trump.
MIDF Research head Imran Yassin recalled that Malaysia, as a highly open economy, experienced the impact of the trade dispute between the two largest economies prior to the pandemic during Trump’s administration.
“Definitely, the trade tensions will impact us and the only way we can navigate this is by finding ways to benefit from this,” he said at a virtual forum organised by the Malaysian Economic Association (MEA) on the Malaysian economy in conjunction with the Bank Negara Malaysia governor’s address.
Such a situation has induced companies in China to diversify in order to navigate the trade conflict and Malaysia has to figure out how it can attract some of those investments.
Although Joe Biden has taken over the US leadership, Imran opined that the trade tensions between the world’s two largest economies are not going away anytime soon.
“You can see from the language of President Biden and his team through their statements, they are maintaining an antagonistic position against China,” he said.
“The only thing we can look forward to is that there won’t be any major action from the current administration given Biden’s calmer approach compared to Trump shoot-from-the-hip demeanour.”
Amundi Asset Management fixed income chief investment officer Eridani Tutiana Jusat acknowledged that Malaysia’s exports are diversified but the bigger question is whether the country can attract those export diversions and benefit from them particularly in the manufacturing and electric and electronic sector.
In this area, she noted that Malaysia will be competing against countries such as Vietnam and Cambodia, which have lower labour costs.
As for the impact on the country’s bond market, Eridani pointed out that the previous trade tiff in 2019 was somewhat positive for the Malaysian fixed income market due to a flight to quality, which resulted in US investors becoming more risk averse, affecting the purchase of US treasury bonds.
“This has translated to lower yields for Malaysian government bonds,” said the chief investment officer. “From what we’ve seen so far, trade tension has been positive to the Malaysian market.”
Meanwhile, MEA past president Datuk Dr R. Thillainathan observed that the countries have become less outward looking, in general.
“Therefore, the outlook for trade in the coming years is going to be a lot worse than what it was before Trump came on board,” he said. These circumstances will be much more of a challenge for Malaysia and other small countries.
Moving forward, Thillainathan believes the country has to be much more competitive and such goals can only be achieved in the medium term.
He called for more cooperation at the regional level to overcome the rise of nationalistic bent.
“In essence, the question is how to get Indonesia to play ball with the other countries in the region, so the region as a whole can be less dependent on the rest of the world if necessary,” said the MEA past president.
For 2021, the World Trade Organization projected global trade to rebound by 8%, after having fallen by 5.3% in the previous year. It stated that the decline last year was less than expected due to the robust second-half rebound fuelled by strong monetary and fiscal support by many governments.
