Can Malaysia benefit from the US-China trade dispute?

The US-China trade dispute is now well into its second year and the longer this dispute between the world’s two largest economies drags on, the more it undermines global growth prospects. So what does this mean for emerging markets like Malaysia ? Will they suffer from the fallout - or can they successfully turn the situation to their advantage? 

 The US-China conflict goes beyond trade. This is an existential battle for who is going to dominate the world, who is going to be the superpower, who is going to be the hegemon shaping the world order over the next 10, 15, 20 years.

However, the rivalry between the US and China differs from past superpower showdowns because the economies of both nations are deeply entwined. Therefore, a further prolonging of the conflict in an increasingly globalised world would have major ramifications for the global economy.

As it stands, the International Monetary Fund (IMF) has estimated that the US-China conflict will bring down global economic output by nearly 1 per cent in 2020 and possibly inflict further losses down the road. 

And despite reports that China and the US have made progress in negotiations, the situation is far from resolved. The latest so-called trade agreement that was announced is really not an agreement it just putted the big questions down the road.

The uncertainty unleashed by the trade dispute is unlikely to improve in the short term, it would be a mistake to try to stop China’s rise or decouple from its economy in any way. There’s only mutually assured destruction possible if you decouple, pointing to the reliance of both the US and Chinese economies on bilateral trade, and China’s significant holdings of US debt.

The Malaysian government’s efforts to attract trade and foreign direct investment (FDI) such as streamlining regulations and taxes, and maintaining a competitive edge need to do more to bring down tariffs and highlighted opportunities in the tech sector as an ideal place to explore synergies.

Malaysia cannot be immune to the trade conflict. Emphasising the need for the country to actively capture opportunities arising from the trade conflict but to differentiate  between opportunism and opportunity.

While the trade conflict calls for some opportunism on our part to secure quick wins, it is only through decisive and sustained steps over the next few years that we can turn ourselves into one of the most attractive investment destinations, not just for the next two years but for the next 20 years and beyond.

It is not about GDP growth. Rather, it’s about a virtuous cycle of demand and investment which can support the growing need for employment.

Complexity, adaptability and network are three words that have come to define a changing world order marked by shifting trade patterns, technological disruption, low interest rates and falling growth. Addressing these three challenges will help us all to navigate and indeed thrive in the current environment.

The world should turn the conflict into a win-win by working together to find a healthy balance between competition and cooperation. Networking, connecting, helping people talk to each other – that is the way forward for growth and progress.”