US tariffs may have little impact on Asean inflation

New Straits Times

a day ago

KUALA LUMPUR: The higher United States (US) import tariffs, which may result in elevated US-centric inflation, may have little impact on ASEAN's price pressures.
RHB Investment Bank Bhd (RHBIB) said in a note that the inflation pressures have been largely muted across key ASEAN economies.
In its latest reports, the investment bank has swiftly downgraded inflation forecasts for Malaysia (2.0 per cent, from 2.2 per cent), Singapore (1.2 per cent, from 1.6 per cent) and Thailand (0.3 per cent, from 0.6 per cent), while keeping Indonesia's relatively benign inflation outlook (2.0 per cent).
"We note that inflation momentum on a year-on-year (y-o-y) perspective has softened markedly, except for Indonesia, as key commodity prices such as food and energy have declined.
"Separately, import prices on a month-on-month (m-o-m) basis for Malaysia and Singapore are negative, underlining the relative tame inflation environment for ASEAN," it said.
The results came following an Ordinary Least Squares (OLS) calculation on the dependent variable: US export price against the independent variable: US import price, which suggests that every one point of increase in the import price index would lift US export prices by 0.902 points.
Meanwhile, RHBIB noted that the imposition of US-led tariffs is reshaping global trade flows.
ASEAN, with its competitive labour markets, strategic location, and improving infrastructure, is increasingly becoming a central player in this evolving landscape.
In the case of Malaysia, the country enjoys strong economies of scale in its semiconductor manufacturing and export industries.
Malaysia is the world's sixth-largest exporter of semiconductors, and accounts for 13 per cent of the global market for semiconductor assembly, testing, and packaging, thus suggesting a sizeable market presence and dominance in global chips.
Importantly, over 95 per cent of its semiconductor exports to the US originate from American firms operating within Malaysia.
This entrenched integration of Malaysian facilities into US supply chains, especially by industry leaders such as Intel and Texas Instruments, suggests that significant disruption would be counterproductive to US manufacturing goals.
Separately, Malaysia's electrical and electronics products (E&E) exports are well diversified across trading regions - the economy has a foothold in E&E exports in China plus Hong Kong (HK), ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore, and Thailand) and the European Union (EU), with trade surpluses seen in electrical machinery, telecommunications, specialised machinery and general industrial machinery.
"However, with increasing US trade protectionist policies, one must ponder a world where trade dependencies and linkages may evolve in a world without US dominance," it said.
In a world without the US as a central player in global trade, it said the structure of international trade dependencies would undergo a profound transformation.
Many countries would seek alternative sources for products once heavily imported from the US, including agricultural goods, pharmaceuticals and high-tech electronics.
For instance, nations previously dependent on US grain and soybean exports may turn to Brazil or Argentina.
At the same time, digital infrastructure and electronics supply could increasingly shift toward China, South Korea or the EU.
This shift would accelerate the regionalisation of trade, with intra-regional linkages becoming more prominent as countries prioritise stability, proximity and political alignment in their economic relationships.
In Asia, for example, trade within ASEAN and with China would intensify, supported by mechanisms like the Regional Comprehensive Economic Partnership (RCEP).