USD to weaken from imposition of tariffs, says AmBank Group Research

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KUALA LUMPUR (March 12): AmBank Group Research expects the US Dollar (USD) to weaken from the imposition of the tariffs.

In a Thematic Strategy report last Friday. AmBank Group chief economist and head of research Dr Anthony Dass said tariffs tend to worsen the trade balance because import demand is less price sensitive in the short term or from the first-round effect of the tariffs.

As such, he said demand will remain the same or drop only marginally while prices paid for imports will rise, thus hurting the trade balance.

“Based on the tariff structure (with only Mexico and Canada exempted), the USD should weaken to a low of 87.5 within the first month and 86.5 within the third month.

“In turn, the Malaysian ringgit (MYR) should gain to around 3.87 within the first month and probably reach around 3.84 within the third month,” he said.

Dass said should the US decide to impose a tariff of 53% on the selected 12 countries, the USD could reach around the 89.0 level in the first month and 88.6 in the third month while the MYR should hover around 3.89 levels in the first month and possibly settle around 3.88 in the third month, given that Malaysia’s exposure to US steel imports is low.

Meanwhile, on the impact on Malaysia from a tariff implementation, Dass said the challenge for Malaysia was if the US decides to impose tariffs on all imported steel products on a set of countries.

“They are Brazil, South Korea, Russia, Turkey, India, Vietnam, China, Thailand, South Africa, Egypt, Malaysia and Costa Rica.

“Apart from import tariffs, these countries will also experience anti-dumping or counter-vailing duty collections applicable to any steel product,” he said.

Dass said should the US impose a 53% tariff on all steel imports on these 12 countries, Malaysia’s exports to the US will drop sharply.

“From our computation, the total loss will be around 0.075 million or 75,000 metric tonnes to 0.021 million or 21,000 metric tonnes,” he said.