A look at Malaysia's economic fault lines

AWANI

Malaysia’s trade-reliant economy faces potential risks from the U.S.'s latest tariff hike, Research Analyst, Yugendran Kannu Sivakumaran provides his insights.

Transcript

00:00So, Malaysia's economy is built on trade, and the United States remains one of our largest export destinations.

00:07But with Washington's latest tariff hype, just how exposed are we to this kind of external shock?

00:13Now, to unpack these questions, I'm joined by Yugen Renkanu Sivakumaran,

00:18Research Analyst at the Economics and Public Policy Department of Bayt Al-Amana.

00:22So, Yugen, how vulnerable are we to this kind of tariff shock?

00:26And what does this mean for our GDP outlook?

00:30Well, thank you so much for asking that question.

00:33We are, if I'm not mistaken, Malaysia's third biggest export partner is the United States.

00:41We export around 50, in 2024, around $52 billion worth of goods through the United States.

00:49A 25% blanket tariff simply would be catastrophic for the Malaysian export economy.

00:58Because we are looking at possibility of slowdown of GDP growth, and maybe even retrenchment.

01:10But of course, this is mostly in the short term.

01:13Because in the long term, Malaysia, we would probably shift into looking into other markets.

01:19But again, this can definitely hamper the Madani's government into looking to increase foreign direct investment,

01:28and also to grow the economy at a rapid rate.

01:32So, in your opinion, Yugen, which Malaysian sectors will be hit the hardest by these tariffs?

01:37If E&E, palm oil, rubber-based products, could this unravel key foreign investment flows?

01:42I would say the E&E sector.

01:46And that's because just of how naturally it's built.

01:50The E&E sector is, again, how do I say this?

01:55It's the cost of the product is a higher value add.

01:59So, a 25% tariff would definitely add into that costs.

02:03And in addition to that, the Trump administration wanted to bring in more E&E production into the United States.

02:12So, this is definitely something that has been planned,

02:17and is basically the largest sector that I feel would be affected in Malaysia.

02:23Well, Yugen, it's also well documented that Malaysia faced some sort of global supply chain disruptions.

02:31How will this tariff compound inflationary pressure or job risk in these affected industries?

02:38Well, when we look at it, consumer confidence is one thing that will be hampered by the tariff scare.

02:48So, we could see the ringgit weakening.

02:51We have seen it weaken when the news came out.

02:54So, this may further weaken the ringgit if measures are not took into place.

03:00Or negotiations are not done at a timely manner.

03:05And that can add to inflationary pressures.

03:09Because, as you know, Malaysia is not self-sufficient.

03:13And we are highly dependent on imports of goods.

03:16And we are highly dependent on imports of goods.

03:17And we are highly dependent on imports of goods.

03:18And we are highly dependent on imports of goods.

03:19And we are highly dependent on imports of goods.

03:20And we are highly dependent on imports of goods.

03:21And we are highly dependent on imports of goods.

03:22And we are highly dependent on imports of goods.

03:23And we are highly dependent on imports of goods.

03:24And we are highly dependent on imports of goods.

03:25And we are highly dependent on imports of goods.

03:26And we are highly dependent on imports of goods.

03:27And we are highly dependent on imports of goods.

03:28And we are highly dependent on imports of goods.

03:29And we are highly dependent on imports of goods.

03:30And we are highly dependent on imports of goods.

03:31And we are highly dependent on imports of goods.

03:32And we are highly dependent on imports of goods.

03:33And we are highly dependent on imports of goods.

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