KUALA LUMPUR (Dec 17): Malaysia is strategically poised to benefit from trade dislocations stemming from the Trump administration’s potential trade policies, as the country is seen benefitting from the “China Plus One” strategy, while insulated from the full brunt of US tariffs, said CIMB Securities.

US scrutiny may curb transhipment activities but also “hasten the China Plus One strategy”, at a time when Malaysia’s position as a transit point for trade from China to the US has become increasingly important, CIMB said.

In its note, CIMB recalled how Malaysia recorded a 47.2% surge in approved foreign direct investments (FDIs) during the 2018 trade war, with huge jumps from both China and US in 2019, helped by competitive infrastructure and production costs.

“The positive gains in combined trade balance with the US and China, by +1.3% of GDP (gross domestic product) between 2017 and 2023, underscore the capture of value-added production in the country,” it said.

“Amid the looming US-China trade war 2.0, Malaysia’s terms of trade — measuring the relative prices of exports to imports — are set to improve, driven by trade diversion and export recovery.

“Building on gains during the first Trump presidency, Malaysia is expected to capitalise on shifts in key sectors such as electronics, chemicals, and palm oil,” it added.

Malaysia is among Asean winners alongside Taiwan, Vietnam and Cambodia, “owing to their integration into global value chains and increased market share,” the research house said.

On the country’s association with BRICS, CIMB said Malaysia’s designation as a BRICS partner, rather than a full member, “provides some insulation from Trump’s proposed 100% tariffs on BRICS nations, pursuing a rival currency to the US dollar”.

On the currency front, CIMB expects emerging-market currencies to see volatility, as rate cuts in the US could be slowed by Trump’s trade and tax policies’ impact towards adding inflation in the world’s biggest economy.

This could temper “the pace of ringgit appreciation to RM4.40 versus the US dollar by end-2025,” said the research house, who had forecasted a 5% GDP growth for Malaysia next year.