Tough tackle against Trump’s tariffs

With 11% of Malaysia’s trade involving the United States, we need to tread carefully in negotiating fairer terms

SWEEPING tariffs imposed by US President Donald Trump have massively shaken the global economic and geopolitical landscape with unpredictable aftermaths.

Stock markets across the world have borne the brunt of the “reciprocal” tariffs on 185 countries and territories.

The United States’ stock exchanges suffered the worst deci­mation last week with a whopping US$6.6 trillion (RM29.486 trillion) – the country’s biggest losses ever.

In spite of warnings by experts that the tariffs would affect everything in the US economy, leading to costlier prices for all goods and services, Trump said he would not back down unless these countries balanced out their trade with the United States.

He did not seem to be bothered by the bloodbath, saying: “Some­times you have to take bitter medi­cine to fix something.”

There are widespread fears that the tariffs would disrupt global supply chains, resulting in higher costs, inflation, stagflation or a global recession.

Effective today, Malaysia, listed under the United States’ “Dirty 15”, has been slapped with 24% tariffs.

The Trump administration has accused Malaysia of imposing 47% of trade barriers on the United States, a claim which Putrajaya has denied.

As described by US Treasury Secretary Scott Bessent, the Dirty 15 comprises 15% of its trading partners that have levied steep tariffs and other trade barriers on US goods.

Although he did not name the countries, the Commerce Depart­ment’s 2024 trade deficit data shows that the US had the highest deficits with China, the European Union, Mexico, Vietnam, Ireland, Germany, Taiwan, Japan, South Korea, Canada, India, Thailand, Italy, Switzerland, Malaysia and Indonesia.

While the 24% imposed on Malaysia seems to be high, it is considerably lower than the 49% imposed on Cambodia, Vietnam (46%), Thailand (36%) and China (34% in addition to the 20% imposed earlier), Indonesia (32%) and Taiwan (32%).

Singapore has the bare minimum of 10% while for the Philip­pines it is 17%.

Malaysia, like the other Asean nations, has agreed not to take retaliatory actions.

But China has struck back by imposing its own 34% tariffs on all imports from the United States, and by placing export bans on certain rare earths, further escalating the trade war between the world’s biggest economies.

In response, Trump has threa­tened China with an extra 50% tariff on goods imported into the United States if it does not withdraw its 34% counter-tariff.

With 11% of Malaysia’s total trade involving the United States, the 24% levy could result in se­­rious repercussions, as this punitive measure is also in addition to other existing import duties.

It would most crucially impact the electronics and electrical sector, machinery and equipment, including medical machines.

These are among the largest export categories to the United States, along with rubber and palm oil, furniture and garments.

Malaysia is currently the world’s sixth-largest semiconductor exporter, constituting about 13% of shipments.

Semiconductors make up about half of the country’s electrical and electronics exports to the United States, the rest being appliances and audio equipment.

Prime Minister Datuk Seri Anwar Ibrahim said he has held high-level talks with several individuals close to Trump over the tariffs, adding that Foreign Affairs Minister Datuk Seri Mohamad Hasan has also received a call from US Secretary of State Marco Rubio.

He has expressed confidence that the country could weather the economic impact if Asean, of which Malaysia is the current Chair, put up a united front with the help of other Asian nations.

“We must stand firm together as Asean, with a population of 640 million and an economic strength that is among the top in the world,” he said during a Prime Minister’s Department meeting on Monday.

Investment, Trade and Industry (Miti) Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz is scheduled to hold a special Asean economic ministers meeting tomorrow to discuss the tariffs.

With Malaysia now leading Asean, the stance is understan­dable and even commendable, but is the regional approach the way to go, especially given the wide disparity of levies imposed within Asean?

We should also take into context that more than 50 countries have already reached out to the US to start direct negotiations.

As Trump put it: “I spoke to a lot of leaders, European, Asian, from all over the world. They are dying to make a deal. And I said, we’re not going to have deficits with your country.

“We’re not going to do that, because to me a deficit is a loss. We’re going to have surpluses or, at worst, going to be breaking even.”

Former Miti minister Tan Sri Rafidah Aziz has since waded into the debate.

She said the government should not have a “wait and see” attitude or, worse still, go on social media to “explain” things with humour.

She said the people and business community were awaiting concrete measures to move forward, and urged the government to instil measures to address and manage the negative impacts on the economy and society.

“We cannot assume that we won’t be badly affected until we understand the possible dislocations to the value chains involved, which could be detrimental to Malaysia,” she said.

Rafidah said these “should have been done yesterday”, adding that the focus should be on thin­king about the nation first, as other countries were guided by their own needs and interests.

The United States’ concerns over Malaysia’s tax regime are not new and need no reiteration.

It goes back to the Trans-Pacific Partnership (TPP) when the contentious matters raised were discussed and addressed.

The TPP, pushed by the Obama administration, was aimed at crea­ting a single market for the US and 11 countries that border the Pacific Ocean, including Canada, Mexico and Chile.

The idea was to make goods flow more freely and cheaply between the countries, which made up one-third of global trade.

However, on Jan 24, 2017, Trump, who was then serving his first term, pulled the United States out of the TPP.

Under the sequential Compre­hensive and Progressive Agree­ment for Trans-Pacific Partnership (CPTPP), ratified in 2022, Malaysia agreed to progressively eliminate duties on all products including steel, alcohol and cars by 2033.

Perhaps this could be the star­ting point for fruitful negotiations.

Media consultant M. Veera Pandiyan thinks the best description of tariffs comes under Ambrose Bierce’s The Devil’s Dictionary: A scale of taxes on imports, designed to protect the domestic producer against the greed of his consumer. The views expressed here are the writer’s own.