Potential effects of trade war between major economies on Malaysia’s trade

Introduction

From the time of Ricardo in the nineteenth century, when the British economist David
Ricardo introduced the theory and concept of comparative advantage, it was clear that progress had
been made in free trade. It has been stated that trade liberalization opens markets and favours
exports through the "natural" functioning of comparative advantage. China has a fifth of the world's
population, four times more than the United States, but only a tenth of the world's arable lands. As a
result, China exports mainly labor-intensive manufactures to the United States. (For example,
electronic products) United States. US exports land-intensive agricultural products to China (eg
Soya). Although the United States has a large trade deficit with China, they have a trade surplus in
agricultural products.

However, since January, there has been a trade war between the United States. Us and in China:
everyone had increased tariffs on marketed products. This trade war began when the United States
submitted a request for consultation to the World Trade Organization (WTO) on China's concerns
about intellectual property rights infringement. China made requests for consultations against the
United States, claiming that the requests had no evidence and, consequently, they had no legal right
to respond based on WTO rules. Since then, none of the parties has been able to agree on a solution.
Meanwhile, the United States and China have reacted by continuing to participate in trade war
activities.

Trade War Effects on Malaysia

The trade conflict between US and China will have global repercussions, not only will it
hinder trade and global growth, but it will also influence supply chains and influence businesses, jobs
and consumers. The trade war between the two giants of the economy could offer new
opportunities to other countries, particularly emerging economies. Malaysia's strong commercial
networks and diversified sectors should enable domestic companies to cope with market disruptions
and seek new opportunities in alternative markets. The report notes that Malaysia's commitment to
engage and seek new insiders will help the country cope with the potential consequences of trade
war. As palm oil exports face difficult market conditions, Malaysia needs to improve its competitive
advantage in world markets. In addition to creating strategies to enter the market, for example
through a collaboration protocol and market promotion in China, the sector should also improve the
efficiency of its production through technology to save money. labor and increase the land.
Advances in tree mechanization have been relatively slow so far. As scarcity increases and labor
costs increase, more research is needed in this area. To date, there is a great disparity between the
status and performance of small farmers. The poor performance of the smallholder sector is
attributed to sub-optimal production and financial constraints. Business management practices are
lower than those recommended. Therefore, it is necessary to focus on agronomic management to
improve the system of small farmers to improve yields. An inventory should also be made to
determine the transfer and adoption of technology among small farmers and the factors that
influence the adoption of the technology.
 There is growing concern that the Malaysian economy is shifting and the global economic
outlook is not very promising. To support this view, for example, the International Monetary Fund
has reduced its growth forecast for the region in 2019 from a previous estimate of 3.9% to 3.7%.
Similarly, Asia The Development Bank puts regional growth forecasts at 5.8%, below the previous
forecast of 5.9%. The trade war between the United States and China and its potential impact on the
market is in the midst of concern that contributes to these changes. According to Shankaran
Nambiar of the Malaysian Institute of Economic Research, tensions between the United States and
China are important for Malaysia. First, as it affects the global market and Malaysia's global export
demand. Second, and more, because China is Malaysia's premier trading partner. As a result, any
trade policy that disrupts trade between these countries can affect Malaysia's trade position,
especially as the export of Malaysian intermediate goods to China is important.

Also this year, Malaysia's export profile will be affected by the situation of the global
electronics industry. At least in the short term, the global electronics industry is expected to grow at
a slower pace, though the reduction in electronic exports cannot be reduced. Another important
export factor, palm oil, does not seem to have promising prospects, though India has reduced import
tax on the product, simply because other factors tend to simplify Action. The price of other products,
crude oil, is also a concern. Analysts tend to think that oil prices may fall and if this has an impact on
export earnings, it is also important for fiscal health. Export slump will reduce account surplus during
the year. Exchange rates may fall. If this happens, it can be a blessing to disguise as a weak ringgit
will make Malaysia's exports more attractive. In a weaker external environment, the softer ringgit
will be positive. Taking into account all factors other than the desired external environment, 2019
will definitely experience lower growth rates. If there is good news, we move towards humidity
rather than negative growth. The coming months will see a more forward-looking guide to
government policies. From a financial point of view, the government has maintained its commitment
to prudent fiscal policy. Certainly be praised. On the monetary side, central banks maintained
benchmark interest rates at 3.25%.

However, in the long run, the impact of trade warfare would have a negative impact on
gross domestic product, production, employment and trade in the United States and China. The
smaller ASEAN countries would also have a significant negative impact on GDP, production,
production and employment, exports, imports and total trade, as these countries are highly
dependent on trade.

Conclusion

At the end of the day, while actively participating in globalization, we must ensure that our
economic sovereignty is not affected. Being an open economy, Malaysia is closely linked to the
global economy through active participation in GVC’s. However, this also means that the economy is
vulnerable and vulnerable to external interference and shock, such as uncertain movement or
volatility in world commodity prices or, in this case, the risks arising from trade war between two of
the world's largest economies.
References

Samirul Ariff. (2019). My Say: US-China trade war and its impact on Malaysia. Retrieved From
https://www.theedgemarkets.com/article/my-say-uschina-trade-war-and-its-impact-malaysia on 9th
May 2019.

Mad Nasir. (2018). Impact of trade war on Malaysia. Retrieved from

https://www.nst.com.my/opinion/columnists/2018/12/438448/impact-trade-war-malaysia on 9th
May 2019.

Impact of trade war on the Malaysian economy. (2018). Retrieved from

https://www.thestar.com.my/business/business-news/2018/11/03/impact-of-trade-war-on-the-
malaysian-economy/ on 9th May 2019.