Gamini Herath and Wai Ching Poon, Monash University: This paper examines the impact of the trade war between the United States and China on Malaysia's trade and investment, focusing on the direct impact of the tariffs on Malaysia's solar panel exports to the United States and China and the potential investment and trade diversion to Malaysia. China and the United States were important trade partners for Malaysia in 2017, accounting for 23 percent of Malaysia's total exports. The paper shows that solar panel exports to the United States have dropped, but re-exports have risen following the trade war, and Malaysia's exports and re-exports to China have increased. Clearly, the imposition of safeguard tariffs on China exports may force the United States to trade with other Southeast Asian countries, including Malaysia.
The solar panel industry expanded because many governments encouraged solar technology through subsidies. The United States supported one-third of all...