How A Trump Presidency Will Affect Malaysia

donald trump

Donald Trump officially has all the power of the American executive behind him, and therefore be in a position to deliver profound and lasting change.

From fiery speeches to bold policy ideas, his rise to commander-in-chief of the world’s largest economy is nothing short of, well, dramatic.

As a country with bilateral ties with the US and a participant of the Trans-Pacific Partnership (TPP), Malaysia will be dealing with Trump one way or another.

So how will the Trump administration affect Malaysia? According to Prime Minister Datuk Seri Najib Razak, not much. But the ramifications are still worth pondering if Trump decides to push forward a few of his ideas made famous during his campaign run.

Below are four scenarios where if they become a reality, might just profoundly affect Malaysia.

Note: these are just possibilities; they may or may not happen.

Goodbye, TPP

From the onset, Trump has been against free trade. For years, the Obama administration has been negotiating the Trans-Pacific Partnership, a trade pact involving 12 nations around the Pacific Rim, including the US, Japan, and Australia.

Outgoing President Barack Obama had hoped to get Congress to approve the pending deal after election but Trump said TPP would benefit special interests that plan to “rape” his country.

But in coming weeks, Republican leaders may not want to pass a pact that would not be implemented next year by a new administration.

If this happens…

Malaysia will miss out on an economic advantage that speaks of a gross domestic product growth of US$211 billion over 10 years.

Some of the changes that was inside TPP such as competitive tendering processes and worker reform, which includes a wage hike, will also be lost in translation.

Malaysia will still try to be pragmatic when it comes to dealing with the US but expect friendlier posturing towards China, which has already invested billions into Malaysia.

Also, a word on slower global growth: the TPP would have boosted Malaysian exports, particularly oil and gas as well as palm oil.

Without the TPP and a growing US market, these commodities will suffer in general, and so will Malaysia’s tax revenues, meaning an even higher cost of living.

Tougher working conditions

From expanding detention centres along the borders of the US to halting immigration from certain parts of the world, Trump has said it all when it comes to dealing with foreigners of all types.

What may bring any of Trump’s ideas to halt is simply that the immigration system in the US has crippling backlogs and if he wanted to seriously reduce illegal immigration, he would need the approval of Congress.

If this happens…

His anti-immigration policy may lead to a slowdown in US growth and global growth in general, resulting from the evictions and the adjustment period that follows suit. This would boost countries that now have a returning workforce, including Malaysia.

Holders of H-1B visas, which allows employers to temporarily hire foreign workers in speciality occupations such as in engineering or medicine or even social sciences, will leave for either their home countries or seek employment elsewhere. For Malaysia, that means a chance of attracting a sought-after talent pool.

Malaysians seeking to visit family in the US or even work there will be expected to go through tighter screening. And forget visa exemption, that is not going to happen.

Higher tariffs on China and others

Trump has accused China of being a currency manipulator and threatened to hike tariffs by 35% to 45%. He also went further to impose big tariffs on imports from certain countries to force concessions to trade deals.

He said he would use “tariffs to discourage companies from laying off their workers in order to relocate in other countries and ship their products back to the US tax-free.”

If this happens…

A trade war will ensue and hurt many US industries, particularly autos, oil and technology, which rely heavily on international supply chains.

This could even entail a series of penalties on big US corporations doing business abroad and hit the pocketbooks of everyone living in the US, whether buying cheap goods at Wal-Mart or expensive goods at the Apple store.

That means Malaysians travelling to or living in the US will have to pay more for goods. For Malaysians here, it will also mean more expensive products from the US.

Also, companies in the US will probably see sluggish growth, which means a short-term dampener on capital investments. Demand in the US will probably suffer and this might have a spillover effect on Malaysia as the US is the largest consumer market.

Climate change

Trump has repeatedly denied climate change, calling it “fictional” and saying it was a hoax created by the Chinese. He vows to undo Obama’s ambitious domestic and international climate change policies.

While legal and procedural roadblocks would impede a complete decimation of Obama’s existing climate change regulations, Trump could weaken or slow them.

On his mind is cancelling the Paris Agreement, the 2015 pact in which nearly every country – including Malaysia – put forth plans to reduce emissions of carbon dioxide.

If this happens…

Malaysia has one of the highest rates of deforestation in the world with most of its land cleared for palm oil or rubber plantations.

The country’s coral reefs – one of the main draws for tourism – are also in danger due to climate change.

If the Paris Agreement is cancelled, Malaysians could be witnessing worse environmental problems in the near future, which also means a major dent to our tourism sector.

Only time will tell

We can’t ascertain how far-reaching Trump’s policies will be and how far he will wield his executive powers.

He started out as a real estate magnate who found fame in reality TV, so there should be some business-friendly policies.

It is expected that much of the politicking and policymaking would be done by his vice-president and cohort of advisers.

The most that we can probably expect is slower global growth, the removal of the TPP and stricter visa requirements.

But for now, let’s just let this fact sink in: Donald Trump is the new US president.

Image from Reuters.

Get free weekly money tips!

*Free of charge. Unsubscribe anytime.
newsletter image