This article first appeared in The Edge Financial Daily on January 24, 2018

KUALA LUMPUR: After over a year of protectionist rhetoric, US President Donald Trump is beginning to match bark with bite in the form of new tariffs — and Malaysian exporters may be among the first to face casualties.

MIDF Research said export growth to the US could decelerate by between 3% and 5%, as the new tariffs on solar panels and washing machines will affect Malaysian manufacturers.

Most of the solar panels used in the US were made in Malaysia, the Philippines and China, and these countries are the ones more likely to feel the pinch through lower export sales, investment receipts and business profits, MIDF said.

Direct exports to the US constitute 9% of Malaysia’s total outbound shipments, the research house highlighted, with an 11.8% growth in exports to the US seen over the first eleven months of 2017.

Trump’s administration has announced a steep tariff on imported washers and solar panels, which include a steep 30% tariff on imported solar panel cells and modules in the first year with the tariffs declining to 15% by the fourth year.

The tariffs will allow 2.5GW of unassembled solar cells to be imported tariff-free in each year.

The US will also be imposing a 20% tariff on the first 1.2 million imported large residential washing machines in the first year, and a 50% taiff on machines above that number.

Despite the negative impact on exporters, any decline in capital investment from the US is unlikely to make a significant dent in foreign direct investment figures as the US contributes less than 7% to Malaysia’s investment activity.

On top of that, MIDF highlighted that inward flows from the US fell for the first three consecutive quarters of 2017 in tandem with Trump’s protectionist moves.

However, the research house warned that the Trump administration is expected to impose tariff hikes on the steel and aluminium industries next as he continues the campaign to attract US-based companies to bring jobs back to Americans.

“Such moves would spur market uncertainties, cause a drop in business confidence, affect commodity prices and could drag down global growth in the medium term,” MIDF commented.