The US just posted its largest-ever trade deficit — $140.5 billion. As Washington pivots away from Beijing, the ripple effects are being felt worldwide, including in Southeast Asia. Economist Doris Liew unpacks the data.
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00:00The world's largest economy just posted its largest ever trade deficit, $140.5 billion US dollars.
00:07Behind that staggering number lies shaken investor confidence and deepening global realignments.
00:13As Washington turns its back on Beijing and pivots towards others,
00:16the ripple effects are being felt across the world, including right here in Southeast Asia.
00:21So is this a short-term jolt, or are we witnessing a more permanent redrawing of the global economic map?
00:28And what does it all mean for a country like Malaysia, sitting at the crossroads of opportunity and vulnerability?
00:35We now speak to Doris Liu, she's an economist specializing in Southeast Asian development.
00:41Now Doris, the US trade deficit has ballooned to a record $140.5 billion USD.
00:46Is this merely a statistical anomaly driven by tariff front running or a structural warning sign for the US economy?
00:52Okay, so the record trade deficit is likely a short-term anomaly rather than a structural red flag right now.
01:02What we are seeing is probably a front-loading of imports.
01:06And businesses are rushing to bring in goods ahead of the expected tariff that was previously announced by Trump.
01:13So that kind of behavior is typical when trade tensions rise and companies want to avoid higher costs in the near future.
01:20However, while the current fight may be event-driven, if tariffs persist, we could see higher import costs in the US
01:28and increase pressure on US manufacturers, which would eventually then translate into real structural challenges for the economy.
01:38So now we are seeing a pivot in the US trade away from China and toward countries like Vietnam, Ireland, Mexico.
01:47How significant is this realignment in the context of global supply chain geopolitics?
01:53So reliance on Chinese goods poses serious geopoliticals and also geoeconomic risks to the US, especially in critical sectors.
02:03I see this challenge as twofold. First, there's the economic side.
02:07So over time, heavy dependence on low-cost imports has contributed to the erosion of US manufacturing,
02:15so what many refer to as de-industrialization.
02:18American producers actually struggle to compete right now, and this is gradually weakening the structural foundation of the US economy.
02:26So decoupling from China is in part an attempt to kind of mitigate this slow but steady decline of the US economy which we have seen in the past decades.
02:38Second, there's the strategic dimension.
02:40The US and China are engaged in a broader context for global leadership,
02:45with tension playing out in pseudo-regions like Taiwan, South China Sea, and the ports in Panama Canal,
02:51in order to control strategic key routes.
02:54So as China rises, the US dominant position is being challenged,
03:00so Washington will see containing China as a key priority currently.
03:05Okay, so there's been a reported capital flight into gold and silver.
03:10What does that tell us about investor confidence in the US dollar?
03:14And is this a warning for emerging markets like Malaysia?
03:16Well, the shift definitely signals a decline in investor confidence in US dollar,
03:25which has long been regarded as a safe reserve asset.
03:30Gold and silver, we have to understand, are traditional safe heavens.
03:33And when capital shifts in that direction, it usually reflects a growing concern over some looming economic downturn,
03:42whether it's through inflation, geo-economic instability, and weakening trust in fiat currencies.
03:49So for Malaysia in particular, these trends tarries both a risk and opportunities, we see that.
03:56On one hand, it reflects broader global uncertainty and can lead to increased volatility in capital flows and financial markets.
04:04So a weaker US dollar means also a reduced purchasing power among American consumers,
04:10which may cause a reduction in the demand for malicious exports,
04:14as we know that US is one of our largest export destination markets.
04:19It may also prompt an assessment of our US reserve holding currently.
04:24On the other hand, malicious exposure to dollar, the not-minated debt, is relatively low,
04:31which means that we won't be so much impacted by the volatility in the US dollar.
04:37So moving forward, I think our focus should not be about whether the US dollar will affect so much of Malaysia's trade and economy,
04:45but the focus should instead be on diversifying our trade partners and building resilience in export markets.
04:51Yeah, before we end this, should we see all of this as an opportunity in this US-China decoupling,
04:58or should we be wary of its spillover effects?
05:03There are certain spillover effects, I agree with you, but there are also many opportunities,
05:08only if Malaysia navigates them strategically.
05:12So tariff will affect our supply chain, there's no doubt about that,
05:16especially since both US and China are among our largest trade partners.
05:20So maintaining a neutral stance diplomatically will be also increasingly difficult,
05:26given how the whole situation is very volatile and we are sort of caught in the middle currently.
05:33So from Washington's perspective, Malaysia isn't seen as a fully reliable partner
05:38because of our close economic tie with China.
05:41So I give two examples for this.
05:43First, Malaysia has become a China plus one destination.
05:46It means that Chinese firms have set up operations here to bypass US tariff.
05:52One of the examples of the industry is our solar panel industry.
05:57Second, the NVIDIA chip incidents, where high-end chips reportedly entered up in China via Malaysia,
06:05raises risk for the US given how this is of high strategic importance to them.
06:10So, but that said, we see that Malaysia still holds the leverage if we can mitigate these issues strategically
06:17because we have a strong manufacturing base, particularly in electrical and electronic sector,
06:23and to some extent in food processing.
06:26So our rare earth reserves are also of the interest to the US,
06:29especially in light of China's export restriction.
06:32So we have to kind of maneuver it strategically and maintain good relations with China,
06:40with Asia, with Middle East, and increasingly also with alternative trade partners like the EU
06:45who are seeking trade diversification.
06:47So this can be a win for Malaysia if we can improve that trade relations with them.
06:53Yeah, that's quite a tightrope we have there for Malaysia.
06:56Long road ahead.
06:57Thank you so much, Doris.
06:58That was Doris Liu.
06:59She is an economist looking at Southeast Asian development.