PETALING JAYA: US President Donald Trump has disregarded the fundamental principles of international trade negotiations by signing an executive order and launching a sweeping global tariff regime.
Former international trade and industry minister Tan Sri Rafidah Aziz said Trump has strayed from the concept and spirit of bilateral, plurilateral (such as with Asean as a bloc) and multilateral negotiations, particularly those under the World Trade Organization.
Rafidah said Trump has used the trade deficit between the United States and other countries as the basis for action, a move that has never traditionally been the foundation of trade negotiations.
“Negotiations have usually focused on key products for the countries involved. By shifting the focus to deficits, Trump has undermined the very foundations of trade discussions,“ she told SunBiz.
Rafidah warned that foreign companies operating in Malaysia may begin reassessing their long-term strategies. “It is not easy to relocate operations involving complex and expensive equipment – these are not ‘mobile’ operations,“ she said.
The government must begin engaging with affected companies to understand how, and to what extent, they are impacted, Rafidah said. “Only then can Malaysia implement measures that will encourage them to remain operating here.”
The newly introduced “reciprocal tariff” policy will see the US apply a standard 10% duty on all imported goods, supplemented by extra levies matching other nations’ tariffs on American products. The rates vary significantly by country, with China facing the highest additional duty at 34%, followed by Indonesia 32%, India 26%, Malaysia 24% and the European Union 20%.
Malaysia Strategy Research Centre president Prof Datuk Chin Yew Sin said it will affect the export of electrical and electronic products to the US, leading to a slower economic growth rate for Malaysia. “The Malaysian government will need to negotiate with the US government so as to get a better tariff.”
In the meantime, he said, Malaysia has to look for other markets, such as South America, the Middle East and African countries, to diversify exports so as not to rely so much on the US market.
“China is our largest trading partner, we have to continuously upgrade our ‘cozy’ relationship with China so that we can increase our exports to that country. China will be expected to achieve its 5% economic growth this year. China will contribute 30% of its economic growth to the whole world and continue to become the engine of growth globally,“ Chin said.
Economist Dr Geoffrey Williams warned that the impact of the US tariff hikes could be significant, adding that if the impact is prolonged, Malaysia’s gross domestic product growth could be dragged to the lower end of the government’s forecast this year.
“The US is Malaysia’s second-largest single export market, and nearly half of those exports are in the electrical and electronics sector, which could be hit hardest,“ he told SunBiz.
However, Williams noted that foreign direct investment (FDI) may remain resilient.
“Tariffs in Malaysia are already low compared to other Asian countries, so the situation could even be positive for FDI.
“But the government must not retaliate with higher tariffs on US products. Instead, it should aim to reduce trade restrictions and negotiate lower tariffs quickly,“ he said.
Williams warned that a broader trade war could erupt if the European Union and China respond with retaliatory tariffs.
“That would be disastrous. For now, I believe this is simply a negotiating stance by the US. The best strategy for all countries is to lower tariffs and trade barriers, ushering in a new era of free trade,“ he said.
The Ministry of Investment, Trade and Industry (Miti), in a statement yesterday, said the agency views these tariffs seriously and is actively engaging with the US authorities to seek solutions that will uphold free and fair trade.
Malaysia is not considering retaliatory tariffs, it said, adding that the National Geoeconomic Command Centre, recently approved by the Cabinet, will evaluate the impact of the US announcement on Wednesday and will consider a comprehensive and multipronged strategy to mitigate the effects of these tariffs on the domestic economy and industries.
According to the US Bureau of Economic Analysis, Malaysia ranks 15th on the US list with a trade surplus of US$24.8 billion in 2024. Despite the trade deficit in goods, the US enjoys a trade surplus in services with Malaysia.
“We acknowledge that Trump’s tariff hike poses a significant challenge to global trade dynamics.
“While respecting such sovereign decisions, Malaysia strongly believes in constructive engagement for mutually beneficial economic relations. Miti is committed to safeguarding Malaysia’s economic interests and maintaining strong trade relations with the US,“ the ministry said in the statement.
To mitigate tariff impact, Malaysia is expanding export markets by prioritising high-growth regions and leveraging existing free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.
