Yeah is hopeful that the trade war build-up will eventually taper as the US moves closer to its mid-term elections in November

By ALIFAH ZAINUDDIN / Pic By BLOOMBERG

Local manufacturers could witness a sharp decline in exports as the US and China continue to trade threat over tariffs, leaving the world’s economy on shaky ground.

Tensions between the world’s two largest economies are already at historic highs as tit-for-tat tariffs on some US$34 billion (RM137 billion) worth of goods hammered sentiments. The global equity markets were reeling last Friday as the deadline to impose the threat drew closer with the local benchmark index dropping to its lowest in since January 2016, erasing 26.79 points.

Sunway University Business School economics professor Dr Yeah Kim Leng said the sub-sequent rounds of duty hikes could result in lower growth for local exporters, especially for those who are involved in the supply chain in China.

“I think most exporters are bracing for a sharp slowdown in their export volume, especially if both the US and Chinese economies experience a slowdown. This will have an impact on their volume,” Yeah told The Malaysian Reserve.

The trade war was officially launched last Friday after the US imposed a 25% tariff on US$34 billion worth of Chinese goods, which the later responded with trade restrictions of its own.

US President Donald Trump has signalled that this would be a long fight as the first round of tariffs would be followed by levies on another US$16 billion of products from China. While Trump’s tariffs targeted mostly industrial and tech goods aimed at disrupting Beijing’s Made in China 2025 strategy to move up the value chain, China’s counter-attack focused largely on agricultural products from the US — a move that will likely hit American farmers the most.

The trade war is expected to disrupt global supply chains and raise prices for consumers across the globe.

Yeah said the tariffs’ increases will have a dampening impact on the global economy.

“Overall, there will be no winners because all economies will likely experience a slow- down due to higher prices and lower demand,” he said.

Yeah, however, is hopeful that the trade war build-up will eventually taper as the US moves closer to its mid-term elections in November. “Hopefully, all this posturing will end together with the polls.”

The underlying tone of Trump’s trade tariffs, however, suggest that the issue was not about trade but a defence of the country’s leadership in the global order against China’s growing influence. The US already blocked a few tech deals involving companies from China, citing national security as a main reason.

Beijing had objected strongly to any tariff hikes for its goods and promised similar actions for US products.

Besides China, the Trump administration is also looking at vehicle imports from Europe, which is valued at over €60 billion (RM284.76 billion). Trump was reported as saying that the days when the US had been taken advantage of “are over”.