PETALING JAYA: While rising global tensions and the United States’ decision to impose steep tariffs on foreign goods may cause economic ripples, Malaysia is not without options, say economists.
Malaysia, they say, has the capacity to soften the impact by tapping into alternative markets and rethink its trade strategies.
Universiti Tun Abdul Razak (Unirazak) lecturer Prof Emeritus Barjoyai Bardai said although Malaysia’s exports to the US may take a hit in the short term, the country’s long-standing effort to diversify its trade partnerships offers a way forward.
“Markets like China, India, Taiwan, the Middle East, Africa and even closer to home within Asean present enormous potential.
“These are not just alternatives. They are attractive, growing economies we should focus on more,” he said.
He also noted that Malaysia has been exploring dedollarisation, reducing its dependency on the US dollar in trade.
This, coupled with the possibility of expanding Free Trade Agreements (FTAs) with regional partners, could strengthen Malaysia’s economic resilience, he added.
While optimistic about Malaysia’s options, Barjoyai acknowledged the immediate impact of the US-imposed 24% tariff on Malaysian goods is expected to be substantial.
Export losses could reach RM33bil within a year, according to estimates.
This drop, he explained, would likely result in businesses cutting production by up to 30%, adding that Malaysia’s corporate tax collection may also shrink by around RM600mil, and wages could fall by RM11bil collectively.
However, Barjoyai said retaliating with similar tariffs would not benefit Malaysia.
“Even if we respond in kind, it won’t change US policy. Our energy is better spent preparing for the shift and strengthening trade elsewhere,” he said.
US President Donald Trump had imposed a 24% tariff on Malaysian imports as part of a broader global tariff strategy affecting multiple countries.
The United States alleged that Malaysia is imposing 47% tariff on its products, a claim Malaysia refutes as its average tariff stands at only 5.6%.
Centre for Market Education (CME) CEO Dr Carmelo Ferlito said the centre had analysed a controversial table used by Trump to justify the new tariffs and found the 47% trade barrier cited for Malaysia misleading and lacking in rigour.
“These numbers were derived by dividing the US trade deficit with each country by its total imports from that country.
“In Malaysia’s case, the US had a US$22.1bil trade deficit and imported US$47.7bil worth of goods, giving a 46.33% ratio.
“But that’s not a real tariff rate. It is just a mathematical ratio being used to push a narrative,” Ferlito said.
In reality, he said the tariffs imposed are much lower than implied by the ratios, and using such statistics to justify a trade war is both misleading and dangerous.
The uneven tariffs imposed by Malaysia and the United States on each other, according to Barjoyai, not only makes Malaysian products more expensive in the United States but also gives American imports a price edge locally.
Still, he said the United States has traditionally been seen as a prestigious export destination, and shifting focus may take time.
“Exporting to the US always gave us a sense of credibility, but times are changing. We have to start seeing value in newer, more strategic partnerships, especially in the region,” he said.
He also suggested for Asean to play a greater role by strengthening intra-regional trade.
Currently, he said only about 25% of each Asean member state’s exports go to other members.
Increasing the figure could help the region become more self-reliant and less vulnerable to external shocks, he added.
