PRO-CHINA NAJIB & FAMILY WILL BE ‘STRIPPED & BARED’: TRUMP’S NEW AG WILL BE EVEN TOUGHER ON MO1 THAN OBAMA’S LORETTA LYNCH
Will a Trump Presidency Affect Malaysia?
While Trump’s economic policies and political agendas are generalised or vague to date, he has consistently highlighted the major ones in campaigns. On that basis, it’s possible to identify and evaluate their likely implications for Msia.
A.Malaysia’s higher export earnings foregone
The Trans Pacific Partnership Agreement (TPPA), expected to significantly boost Msian exports at a time when it’s slumping fast will be scrapped as Trump seeks to eliminate or renegotiate trade deals in favour of the US. Additionally, Trump’s determined to erase Obama’s legacy of which the TPPA is one, and thus presenting a major setback for a struggling Msian economy.
B. Further Ringgit weakening Trump will rely less on monetary (cheap money) and more on fiscal policy (spendings on highways, bridges, airports etc) to stimulate new economic growth. That would spell the end of low US interest rates leading to a stronger Dollar, and, by default, a weakened Ringgit.
C. Decreased American investments in Malaysia Trump’s plan to reduce US corporate tax from 39% to 15% to attract American investments and earnings parked abroad could freeze new and/or reduce existing US investments in Msia. The lowered tax rate could also lead to a significant outflow of funds, invested in Msian bonds and equities, to the US. That would further weaken the Ringgit apart from destabilising the economy.
D. Capital flight to the US from Malaysia Trump’s new economic model, designed to stimulate faster economic growth with large government infrastructure and defence spendings financed by returning American investments, earnings rewarded by a 15% tax rate, would lead to a global capital flight to the US. Thus, Msia could stand to lose other foreign investments, present and future, as well
E.Relationship difficulties with the US
Trump’s Islamophobia, including banning Muslims from the US, could make it difficult to forge new ties with his administration as Msia is a small Islamic nation with little to offer the US. That’s the way Trump will view Msia as a ROI driven businessman. Additionally, the reality or perception of Msia’s alignment to China, with the mega RM144b economic aid package given, could make matters worse. Trump’s dislike for, and distrust of, China is very public. China stands to lose out most from Trump’s policies, and an unsuspecting Msia could be trapped in a very likely trade war between the US and China.
F. US Department of Justice 1MDB related prosecutions escalated Trump will replace Obama’s appointee, Loretta Lynch, the current Attorney General, with Chris Christie, a tough ex public prosecutor. While Obama could have protected MO1 by at least not naming him on the strength of a personal relationship, that protection ends when Trump’s sworn in on Jan 20 2017. And Msia, now perceived to be pro China, could complicate matters for MO1 – bad timing, bad move on the bromance with Xi Jinping.
Of course, Trump may back pedal on his election rhetorics and threats, but as it stands, a Trump presidency doesn’t look good for Msia. And MO1.