KUALA LUMPUR: Donald Trump’s potential re-election as the President of the United States is anticipated to accelerate the China Plus One strategy, providing Malaysia with increased investment prospects and enhanced export opportunities, particularly in sectors like electronics, machinery, and palm oil.
According to BERNAMA News Agency, CIMB Securities’ senior economist Vincent Loo predicts that Trump’s return to the White House would strengthen a path of increased tariffs and protectionist policies, which include a suggested 10 percent tariff on all imports and a 60 percent tariff on Chinese goods specifically. “With escalating US-China trade tensions, Malaysia could see increased export demand from US companies looking to source products outside China, creating export growth opportunities in high-value sectors,” Loo stated in a research note.
Loo suggests that foreign direct investment (FDI) in Malaysia is likely to rise as firms seek stable manufacturing bases within the ASEAN region. Malaysia is emerging
as a competitive destination due to its robust infrastructure and relatively lower production costs. However, Loo also cautioned that renewed trade uncertainties might trigger a risk-off sentiment in financial markets, pushing investors towards safe-haven assets, which could strengthen the US dollar and lead to capital outflows from emerging markets, including Malaysia.
The increased tariffs on Chinese goods may prompt US companies to shift sourcing from China to Malaysia, boosting demand for Malaysian exports of semiconductors and electronic components. Nevertheless, if trade tensions escalate further, overall demand might decline, potentially curbing exports to both the US and China. Similarly, Malaysia’s machinery and appliance exports are expected to benefit as the US looks for alternatives to Chinese products. Yet, heightened tariffs and trade barriers could result in increased costs and reduced global trade demand, impacting Malaysia’s trade volume.
Moreover, Trump’s ‘America First’ energy policy, whi
ch focuses on boosting US production, could drive down global energy prices, potentially diminishing the value of Malaysia’s mineral fuel exports, Loo noted. Despite these challenges, CIMB Securities has maintained its forecast for Malaysia’s gross domestic product (GDP) at 5.2 percent for 2024 and 5.0 percent for 2025, although it acknowledged that the export-import outlook might face upside risks due to increased trade flow volatility and fluctuations in foreign exchange levels.
Loo emphasized an anticipated external demand recovery driven by the global tech upcycle, alongside robust domestic spending supported by strong investments and resilient consumer spending. The ringgit is expected to experience near-term volatility, largely dependent on the US Federal Reserve’s policy decisions.
Meanwhile, Hong Leong Investment Bank (HLIB) highlighted that the proliferation of the China Plus One strategy would benefit Malaysia’s electronic manufacturing services sector as brand owners shift or diversify their manu
facturing from China. Increased FDI to Malaysia could positively impact sectors such as construction, industrial property, and real estate investment trusts. HLIB also noted the potential for more economic fluidity and market volatility under a Trump presidency, given his confrontational approach.
HLIB maintained its end-2024 FTSE Bursa Malaysia KLCI target at 1,700, remarking that investment themes focused on tourism recovery, energy transition, Johor’s developmental reinvigoration, and disposable income-boosting measures should remain fairly insulated from the US election outcome, while trade war beneficiaries could see renewed interest.