KUALA LUMPUR (Sept 4): Malaysia’s exports growth to the United States will slow to 3-5% this year, as compared with 10% last year, due to the imposition of tariff hikes by Washington since early this year. 

“We view the demand on manufactured goods, especially products relating to washers, solar panels, aluminum and steel, to drag down Malaysia’s exports to the US,” said MIDF Investment Bank Bhd in a report today. 

The research house said the US has been a strong surplus contributor to Malaysia and hence, a slower demand from Washington on Malaysian products would reduce the size of Malaysia’s trade surplus. 

“Every 1% drop in US demand will reduce Malaysia’s output by 0.86%,” the report added.

Last year, Malaysia’s trade surplus with Asean, the European Union and US was RM58.2 billion, RM15.5 billion and RM19.4 billion respectively, the report noted. Comparatively, Malaysia had a trade deficit with China, worth RM38.4 billion. 

Over 95% of Malaysia-US total trade is dominated by manufactured goods, particularly electronic and electrical products, with the rest comprising exports of optical and scientific equipment, rubbers products, transport equipment and metals, it added. 

Meanwhile, MIDF Investment Bank said based on its estimate, the world's gross domestic product growth would reduce by 0.71%, if demand by US on Chinese goods and services drops by 1%, ultimately causing China’s economy to shrink by 0.72%. 

“Due to geographical factors and integration effects, a slowdown in US demand for China’s products would lead to contraction in Taiwan, Hong Kong, South Korea, Malaysia and Singapore, in the range of 0.14% to 0.19%. 

“Sector-wise, our results indicate China’s sectors, namely computer, electrical and optical equipment, textile products and domestic trade, to be impacted the most, shrinking by 0.09%, 0.07% and 0.05% respectively,” the report added.

In measuring direct impacts, MIDF Investment Bank projected a fall in demand by the US on Malaysian products by 1%.

“Consequently, the fall in demand will affect among others, countries such as Hong Kong, Singapore and Vietnam, due to their respective roles in global value chain. The sectoral impacts are expected as almost 96% of Malaysia-US trade concentrated on manufactured goods,” the research house added.