PETALING JAYA: Asean countries must urgently strengthen intra-regional trade to reduce exposure to external shocks amid rising global trade tensions, says Prof Dr Wong Chin Yoong of Universiti Tunku Abdul Rahman (UTAR)’s Faculty of Business and Finance.
Currently, intra-Asean trade accounts for only 20% of total trade, far below the 50% to 80% seen within the European Union (EU), he said.
“It’s time to position Asean as an end-user market. Foreign investors should not come here only to produce for export but to serve the growing Asean consumer market,” he said when contacted.
Prof Wong believes a long-term strategy – spanning the next 10 years – is essential to nurture stronger regional trade ties, especially as Asean economies such as Indonesia, Vietnam, Thailand and Malaysia continue to expand.
He also cautioned that Malaysia’s SMEs, though largely focused on domestic markets, are likely to face intensified competition from foreign imports due to escalating global tariff conflicts, which he refers to as “Tariff 2.0”.
“Over 90% of our SMEs are in the services sector, mainly catering to the local market, but they will face rising import competition,” he said, pointing out that goods originally intended for the United States may be redirected to Asean as demand in the US declines because of tariffs.
Prof Wong observed that China has already been decoupling from the US since the last tariff war and is now shifting its focus towards trade with the Global South, including Asean.
“In 2015, about two-thirds of China’s trade surplus was tied to the US trade deficit. But last year, less than 30% of that surplus came from the United States, with most trade now flowing to the Global South, Asean included,” he explained.
On foreign investment, Prof Wong warned that FDI flows into Asean and Malaysia could slow as global investors adopt a “wait and see” approach in light of ongoing tariff escalations.
He noted that Tariff 2.0, unlike earlier rounds, is no longer focused solely on China but now targets US allies and partners, including the EU, Canada, Mexico, and soon India, Japan and South Korea.
“FDI flows into Malaysia in recent years – particularly in electronics and data centres – may not continue if companies decide to delay investments amid an uncertain environment,” he said.
Although some may expect that higher tariffs will drive FDI back to the United States, Prof Wong expressed doubt over such an outcome.
“US President Donald Trump may hope for reshoring but I doubt that’s possible given the high production costs in the US. More likely, we’ll see a global slowdown in FDI over the next six to 12 months,” he added.
Prof Wong stressed that Asean must shift its focus to building a resilient intra-regional trade ecosystem to buffer against rising global uncertainties and tariff-induced disruptions.
Malay Economic Action Council (MTEM) senior fellow Ahmad Yazid Othman said the recent tariffs represent significant structural disruptions that Malaysia, particularly its SMEs, must brace for.
“The tariff wars indicate a resurgence of protectionism.
“If this persists, we risk entering a new era of fractured multilateralism and uncertain global cooperation,” he said.
A passive approach, he stressed, will be costly for Malaysia, and called for decisive government action.
He recommended the activation of a National Taskforce on Global Trade Volatility as well as enhanced export financing for SMEs.
“We cannot afford a ‘wait-and-see’ approach,” he said.
Ahmad Yazid, however, believes that Malaysia can seize opportunities if it acts strategically.
“Trade tensions are forcing global firms to look for stable, lower-cost, well-located production bases. Malaysia must seize this moment,” he said, advocating for targeted incentives for local companies.
He also urged Malaysian businesses to be adaptable, and to grow and lead in value-added sectors.
“This is not merely a trade war. It is an economic turning point. Either we build resilience now –or pay the price later,” he said.
