A view of solar panels in Lianyungang, China. — AFP
KUALA LUMPUR: Potential US tariffs of up to 60 per cent on Chinese exports could have a mixed impact on ASEAN economies, creating medium-term growth opportunities for the ASEAN-6 region, which includes Malaysia, said OCBC Global Markets Research.
Under the primary scenario, or scenario one, where the tariffs are implemented solely on Chinese exports, OCBC’s house view anticipates that China’s gross domestic product (GDP) growth could decline by up to one percentage point.
"However, the ASEAN-6 countries, namely Malaysia, Singapore, Indonesia, Thailand, Vietnam, and the Philippines - could largely remain unaffected, with a possibility of them benefiting as firms look for alternatives to China in the medium term,” the Singapore banking group said in a note today.
In terms of timing, OCBC said it assumes that the tariffs will be implemented and made effective in January 2025 if Donald Trump wins the US presidency.
OCBC said it also outlines two other scenarios where broader economic spillovers could impact ASEAN growth, with it estimating a reduction of 0.7 and 1.3 percentage points in GDP growth for the ASEAN-6, respectively.
"Under scenarios two and three, tariffs are imposed on all trading partners including ASEAN along with 60% tariffs on China’s exports to the United States.
"Under scenario two, we assume a tariff of 10% is imposed on all US trading partners including the ASEAN countries along with a tariff of 60% on China’s exports to the United States.
"Under scenario three, a 20% tariff is imposed on US trading partners, along with a tariff of 60 per cent on China’s exports to the United States,” it explained.
According to OCBC, Malaysia’s export share to the United States from January to August 2024 was higher than that of mainland China, "reflecting a rising sensitivity to potential tariffs from the United States.”
It noted that Malaysia’s export portfolio to the United States is concentrated, with electronics and machinery accounting for about 77 per cent of total exports to the United States, while commodities and labour-intensive products contributed about eight and 7.5 per cent, respectively.
While Malaysia has a diversified export base in terms of trading partners and products, OCBC warns that tariffs could reduce Malaysia’s GDP growth by up to 0.9 percentage points under scenario two and as much as 1.5 percentage points under scenario three.
"However, under the first scenario, OCBC expects a modest impact of 0.2 percentage points on Malaysia’s GDP growth, mainly due to reduced demand from China.
"Higher tariffs on China alone will impact Malaysia via slower demand from China but there is a clear offset in terms of rising investments and further acceleration of the ‘China +1’ policy,” it said, referring to the business strategy to avoid investing only in China and diversify business into other countries. - Bernama
