U.S.–China Trade War: Potential Trade and Investment Spillovers into Malaysia^*

This study examines the potential impact of the current trade war between the United States and China on Malaysia's trade and investment. For solar exports, the immediate impact from 2017 to 2018 shows that gross and domestic exports to the United States have fallen but re-exports have increased, and Malaysia's exports and re-exports to China have increased. Excluding solar, the increase in gross exports to the United States is borne by re-exports. The possibility of increased investment, as firms relocate from China, is high given the growing presence of China's investment in Malaysia since the announcement of the Belt and Road Initiative.