How Trumponomics affect Malaysia

by Maneesha Kaur Khalae

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Malaysian Prime Minister Najib Razak and President Donal Trump – (The Malaysian Times) 

As the US elections proceeded, the world held its breath, wondering where the chips would fall and in whose favor. President Trump’s victory certainly took the global audience and political pundits by surprise, and many expressed concerns over how the election of a business mogul rather than an experienced Washington politico would affect them. Perhaps none so more than Malaysia, whose fate is tied, alongside many other Southeast Asian countries, to the state of the US economy.

Potential reduction in GDP, tax revenue, and increased inflationary pressure 

The biggest concern over Donald Trump’s election was the issue of the Trans-Pacific Partnership (TPP). Along with Malaysia, the signatories of the agreement include the United States of America, Japan, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile, and Peru. Collectively, these countries make up approximately 40% of the world’s GDP and 26% of the world’s trade.

Trump’s decision to withdraw from the partnership means that Malaysia will have to forgo the benefit of a gross domestic product growth of $211 billion over a period of 10 years, according to the New Straits Times. It will also lose out on reforms such as competitive tendering processes and wage hikes for workers. The US withdrawal of TPP also signifies reduced exports in the palm oil and gas industries for the Malaysian economy.

The US market is no longer as open to Malaysian commodities as Malaysia would like or need it to be, which means a fall in Malaysia’s tax revenues leading to a higher cost of living. Further, the Malaysian’s government’s unpopular Goods & Service Tax (GST) will worsen inflation in the country, adding to more fiscal problems.

Harsher immigration stance

The White House’s brusque attitude towards immigration may result in a global economic decline, caused by primarily by deportations, and a considerable number of immigrants with H1-B visas will have to return home to Malaysia.

Given that the country is experiencing a brain-drain crisis, this could be a silver lining as it will help burgeon the domestic talent pool, especially in the fields of engineering, medicine, and even the social sciences.

More tariffs

The tariffs that Trump has threatened to impose on Chinese exports (around 35-45%) could result in higher costs of goods as suppliers relying on international supply chains will be forced to pass on the increase in production costs to consumers, as well as to the American companies doing business abroad. This will not only affect American consumers but also Malaysians. As demand in the US suffers, the spillover effects in Malaysia will certainly be felt since the US is one of the largest exchange markets.

Alternatively, China could redirect a greater proportion of its trade relationships with its ASEAN neighbors such as Malaysia instead of the USA. This is looking to be increasingly plausible as it seeks to ‘punish’ Singapore over siding with the USA over the South China Sea territorial dispute. This, however, may be thwarted by the influence of a pro-global Jared Kushner. If Arabella Kushner’s, Jared and Ivanka’s daughter, impressive deployment of Mandarin skills at the Trump-Xi summit is any indicator of the USA’s future soft diplomatic approach, it appears as though the US-China tensions that had previously soured seem to be cooling in favor of trade with China.

Accelerating climate change

If Trump does decide to cancel the 2015 Paris Agreement, which stipulates that each country must plan to reduce its carbon emissions, the effects of environmental degradation will accelerate. The implications for Malaysia would be devastating as the country has one of the highest rates of deforestation in the world. Land overuse for palm oil and rubber plantations, as well as an increase in carbon emissions, will only worsen an already fragile ecosystem, thereby increasing the likelihood of flash floods and landslides. The country also depends heavily on its coral reefs, notably for tourism. If part of the “Coral Triangle” is damaged, lost revenue and regional unemployment will certainly threaten the country.

It is safe to say that Trump’s presidency seems to be heading in a worrying direction for most of Southeast Asia – and Malaysia is no exception to that. However, the art of prediction is not a science, and no one can ascertain the degree to which Trump’s policies will affect the world.

Ironically, Malaysian Prime Minister Najib Razak, far from expressing any concern over the election of President Trump, has congratulated the former real-estate mogul, who is also his close friend. Given Najib’s embroilment in the 1MDB scandal, it should come as no surprise to any Malaysian nor anyone who has been following recent developments in Malaysian politics, that the Prime Minister should be sympathetic to a politician involved in questionable business dealings and avoidance of declaration of taxes. But for now, the effect of Trumponomics still remains a mystery to which one must take the approach of ‘wait and see’.

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