KUALA LUMPUR, Aug. 5 (Xinhua) -- The Malaysian economy will be dragged down as global trade tensions re-escalate with the new U.S. levy imposed on China, Malaysia's research institutes said on Monday.

(Photo: VCG)

Hong Leong Investment Bank (HLIB) Research said in a report that with all Chinese imports to the United States subject to tariffs, the negative spillover effect on Malaysia could be up to -0.9 to -1.1 percentage points of the gross domestic product (GDP) growth.

"As a small open economy, Malaysia will not be insulated by the escalating trade tensions," said HLIB Research.

Last Friday, U.S. President Donald Trump tweeted that the United States will impose an additional 10-percent tariff on the remaining 300 billion U.S. dollars' worth of Chinese imports starting on Sept. 1.

"As the bulk of new tariffs are targeted at consumer goods, this is anticipated to have negative implications on U.S. consumption activity," said HLIB Research. "The worsening trade relations are also anticipated to weaken investment activity."

The latest purchasing managers' index (PMI) global manufacturing new exports sub-index contracted to 48.3, the lowest since October 2012.

"Going forward, the unresolved trade tensions between the United States and China, with possible additional tariffs to be imposed, will impact and disrupt global supply chains further, which will lead to some downside risk to global GDP growth," said Affin Hwang Capital.

It is noted that Malaysia's manufacturing PMI fell for the third month in a row to 47.6 in July.

Amid global trade tensions, Malaysia last Friday saw its June exports contracted for the first time in three months, dragged down mainly by its manufactured goods exports.

Malaysia's exports fell 3.1 percent year-on-year to 76.17 billion ringgit (18.22 billion dollars) in June, as its total trade fell 6 percent to 142.08 billion ringgit (34 billion dollars).

"We have revised lower our forecasts on growth in gross exports to 1 percent for 2019 (from an earlier projection of 2 percent)," said Affin Hwang Capital.

Due to the latest U.S. tariff imposed on Chinese imports, CGS-CIMB Research also foresees that Malaysia's trade activity will remain subdued in the second half of 2019.

"Similar to past episodes when there has been a lag between the announcement and implementation of tariffs, U.S. importers are expected to build inventories ahead of the tariff deadline, before cutting back on purchases thereafter," it said.

It forecast a marginal growth in Malaysia's gross exports of 1.3 percent this year, as compared to the growth of 6.8 percent last year.

Malaysia's total trade dropped by 1 percent to 895.95 billion ringgit (214.37 billion dollars) in the first half, with exports down by 0.2 percent.