Still, Trump's trade policies carry a major risk for the Malaysian economy in the long term. Malaysia is an export-oriented economy with close links with both China and the United States. Trump's proposal to introduce broad-based tariffs of 10–20% on all imports arriving in the country and a 60% tariff on Chinese goods would have a major negative impact on Malaysian economic growth. 'Malaysia is an open economy and has a lot to lose if the U.S. turns protectionist and starts to engage in another trade war with China', says Kar Yong Ang, a financial market analyst at Octa Broker. Indeed, World Bank estimates that approximately 40% of Malaysian jobs are linked^[2] to export activities. New tariffs will act as an external shock hitting the demand for Malaysian goods, slowing down its economy and potentially leading BNM to cut borrowing costs, which, in turn, may put additional upward pressure on USDMYR in the long term. 'In the worst-case scenario of an all-out trade war between China and the U.S. and a 20% additional tariff on all Malaysian exports into the U.S., USDMYR can rise above the 4.800 level and may hit a critical 5.000 mark. However, I do not see that scenario happening, at least not in the short term', says Kar Yong Ang, a financial market analyst at Octa Broker.

As things currently stand, the Malaysian economy is on a sound footing. Although the latest macroeconomic statistics have been somewhat disappointing—notably, the annual growth in industrial output slowed in September to 2.3% (vs 3.7% expected by the market), while exports declined by 0.3% (whereas the market expected to see a growth of 7.6%), the general trend is still relatively positive. Official estimates show that gross domestic product (GDP) likely expanded^[3] at a solid 5.3% rate in Q3. Although economic growth has slowed from the 5.9% growth rate recorded in Q2, it is still expanding at an impressive rate. Furthermore, as Kar Yong Ang notes: 'the growth rate in Q2 was actually a bit of an outlier as it was the fastest rate in 18 months, due to exceptionally robust investment and higher household spending and exports'.

Kar Yong Ang, a financial market analyst at Octa Broker, had this to say: 'While BNM doesn't prioritize currency stability, the prevailing financial market uncertainty has prompted the central bank to adopt a cautious approach. For instance, the bank acknowledged that the outcome of the U.S. elections could introduce increased volatility to the ringgit in the short term. However, I personally believe that USDMYR is unlikely to rise much above 4.50 as the narrowing interest rate differential between the U.S. and Malaysia remains a positive factor for the national currency'.

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References

1. ^{^} Media OutReach Newswire (www.media-outreach.com)
2. ^{^} linked (www.worldbank.org)
3. ^{^} expanded (www.dosm.gov.my)