KUALA LUMPUR: Malaysia stands to gain if the US imposes tariffs on the top five imports from countries with which it has high trade deficits, namely China, Mexico, Japan and Germany.

In a special report, Global trade: Trade first! (Avoiding an own goal), Standard Chartered Global Research said that Mexico and China competed the most against reach other on a wide variety of products imported by the US.

However, instead of the US targeting just one of them, some protectionist measures were likely to be imposed against both, it said.

Besides Canada, several Asian countries might benefit by stepping up direct supply of these products, the report said, hence offsetting any losses due to the lower intermediate goods exports through the supply chain.

"So (South) Korea, Taiwan and Malaysia could ramp up direct exports to the US," the bank said, adding that other countries that would benefit included Vietnam, Thailand and the Philippines.

Among the major product categories imported by the US from the four countries that Malaysia also supplies are electrical machinery, apparatus and appliances, telecommunications equipment, and office machines and automatic data processing equipment.

However, it is not all roses for Malaysia, which - along with South Korea, Taiwan and France - could also be hurt as it supplies intermediate products to the countries targeted by the US..

The Standard Chartered report said a full-blown 1930s-style global trade war was unlikely as the world economy economy was now structured differently. Financial and trade flows have closely integrated economies, making it harder to punish a partner without getting hurt in the process. Also, the World Trade Organisation covers 98% of world trade and its membership discourages tit-for-tat trade wars

However, more US protectionism was likely and would be a major threat to world trade given the US' status as the world's largest importer, Standard Chartered said.

"Weak demand has inhibited the global trade recovery since the (2008-09) global financial crisis. US demand now drives global import demand again, but protectionism could undermine this progress,"it said.

Over time, it said, China could supplant the US as the main final demand destination.

 

Read more at http://www.thestar.com.my/business/business-news/2017/04/19/malaysia-may-gain-from-us-protectionist-move/#YvztGatsdKJ37imy.99