KUALA LUMPUR (Aug 1): Malaysia would be one of the most vulnerable Asian economies in a global trade war if Donald Trump comes to power again, said Australia and New Zealand Banking Group (ANZ).

A universal baseline import tariff of 10% on all US imports risks sparking a global trade war, ANZ said, warning that the impact would be greatest on the export-oriented and manufacturing-heavy economies of Malaysia, Taiwan, Vietnam, Thailand, and South Korea.

“Malaysia, the Philippines and Taiwan could be vulnerable to shifts in the electronics integrated circuit supply chain,” the house said.

Malaysia hosts some of the world’s largest electrical and electronics companies, ranging from semiconductor giant Intel to consumer electronics maker Samsung, and from computer storage company Western Digital to power tool manufacturer Bosch.

The country is also the seventh largest semiconductor exporter with 7% of global market share, and accounts for 13% of the global share of chip assembly, testing and packaging in the supply chain, according to the Malaysia Semiconductor Industry Association.

As the Republican presidential candidate, Trump is going into the US election in November promising far more prohibitive trade policies than those implemented during his previous term.

In addition to the universal baseline import tariff of 10%, Trump has also proposed a 60% tariff or more on all US imports from China, which is likely to cut into aggregate demand in both economies and “put the global supply chain in disarray”, ANZ said.

Any potential gains for the rest of Asia from trade diversion and production relocation, meanwhile, will be limited by growing risk of Trump making it more challenging for products with significant Chinese content to enter the US, the house said.

That could also prompt Chinese exporters to strengthen their presence in non-US markets, raising competition for Asia not only in non-US export markets but also within domestic markets, ANZ cautioned.

“Asian economies with high levels of export similarity with China or with weaker manufacturing bases would be impacted,” the house said.

Chinese companies are already under pressure, as growth in their home market decelerate and the Chinese economy is expected to undergo a structural slowdown over the medium term. The World Bank projects China’s growth to slow to 4.5% in 2024, from 5.2% in 2023.

“We also anticipate greater export competition among Asian economies in non-US markets, as well as greater penetration of Chinese exports in Asia’s domestic markets,” ANZ said. “Sustained weakness in China’s economy will likely exacerbate this competition.”