KUALA LUMPUR: Malaysia's economic outlook is unlikely to see significant changes following the Democrats' victory in the US midterm elections, as President Donald Trump is expected to retain considerable influence over the country's economic and trade policies, economists and analysts say.
Although Democrats have secured control of both the House of Representatives and the Senate, the shift in congressional power could make it more difficult to introduce new legislation or implement major policy changes during the remaining two years of Trump's presidency, according to The Star.
Institute of Strategic and International Studies (ISIS) Malaysia analyst Jaideep Singh said the situation could result in a legislative stalemate, with both parties facing challenges in advancing their respective agendas.
He said Democrats might seek to review or reduce selected reciprocal tariffs, particularly those affecting Canadian imports, which have drawn concerns from households and businesses. However, a broader rollback of Section 301 tariffs affecting Malaysia and other trading partners was less likely.
The US Agreement on Reciprocal Trade with Malaysia, which remains unratified more than a year after its signing, could also remain pending.
Jaideep said Malaysia could use the opportunity to revisit the agreement, particularly its market access provisions, although policymakers were likely to adopt a wait-and-see approach.
He added that Malaysia's semiconductor industry was unlikely to be significantly affected by any US policy changes concerning data-centre investments, given the country's established chip assembly and packaging ecosystem, which serves multiple industries.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the implications for Malaysia would depend on how the election results translated into actual changes in US trade and economic policies.
He cautioned that greater congressional scrutiny would not necessarily mean a reversal of existing tariffs or protectionist measures.
Mohd Afzanizam also said Malaysia's semiconductor growth prospects remained supported by structural demand from artificial intelligence, computing, data centres and digital infrastructure, rather than political developments in the US.
He stressed that tariffs and export controls should be viewed separately, noting that while tariffs affect the cost of accessing the US market, export controls could restrict access to advanced chips, equipment and specific customers.
Malaysia's semiconductor exports remain exempt from US tariffs, although businesses should continue monitoring policy developments, he said.
Meanwhile, Nusantara Academy for Strategic Research senior fellow Dr Azmi Hassan said Trump's ability to pursue tariff measures could face greater scrutiny from Congress, although existing legislation and presidential veto powers would provide him with avenues to maintain his policies.
He said the changing balance of power in Congress could nevertheless create opportunities for Malaysia if it resulted in a more measured approach to trade restrictions.