AS US tariff threats dominate headlines and markets reel, concerns mount from Washington to Kuala Lumpur. Malaysian analysts warn that US trade measures, especially against China, could disrupt local industries and raise costs.
However, a broader look shows that these threats are far from an economic apocalypse. In fact, Donald Trump’s protectionism may backfire, isolating the already shrinking US market while giving countries like Malaysia a chance to reshape their trade ties.
The global impact of US tariffs is often overstated. With 347 million people, the US accounts for just 4.23% of the world’s 8.2 billion.
Worse, income inequality skews purchasing power, with the top 20% controlling 50% of disposable income, shrinking its effective market share to just 0.846%.
In an already deeply divided economy, protectionism risks deepening social and economic fissures. Instead of fostering self-sufficiency, high tariffs may worsen disparities, inefficiencies and even fuel polarisation or unrest.
Countries targeted by tariffs are likely to retaliate. On Feb 5, China responded with limited tariffs and signalled possible sanctions against US firms like Google, showcasing a measured but strategic counteraction.
Emerging markets and BRICS+ encompass 4.6 billion consumers – a vast pool of potential innovation, production and investment that far surpass the US market. By imposing tariffs, Trump risks severing ties
with these growing economies, endangering US exports and global supply chains.
However, recent events reveal Trump’s patchwork approach. On Feb 3, Reuters reported that while tariffs on Chinese goods proceed, those on Canada and Mexico were paused for 30 days after border concessions.
This selective enforcement shows a willingness by the US to negotiate with close trade partners while keeping China in the crosshairs. Yet, the contradiction remains – imposing tariffs while depending on foreign commodities will fuel uncertainty and disrupt long-term planning.
The high-tariff strategy appears at odds with preserving the US dollar’s global supremacy. Boosting American exports and reshoring manufacturing will ostensibly require a weaker
dollar unless the underlying goal is to refashion the US into an “ordinary” economy.
Historically, a strong dollar has primarily benefited US corporate elites, enabling cheap borrowing and access to global capital, while ordinary Americans face higher prices and potential job losses.
Of course, high tariffs are likely to fuel global uncertainty, a trend historically tied to capital flight into safe-haven US assets, which can strengthen the dollar. Yet, in today’s context, this dynamics is increasingly complicated by the accelerating push towards “dedollarisation”.
Some analysts compare Trump’s tactics to the 1980s “Plaza Accord”, which pressured allies to appreciate their currencies and ease the US trade deficit. However, that strategy worked in a more insular era. Today, China, a global powerhouse with its own strategic priorities, is unlikely to comply, making such coercion ineffective in a multipolar world.
Beijing’s integrated role in the global economy gives it ample room to manoeuvre around US pressures, and it is likely already exploring alternative channels to minimise any negative impact from protectionist measures.
As for Malaysia, although it is not directly targeted by US tariffs, it remains an integral part of the global supply chains connecting economies worldwide. Consequently, local policymakers’ concerns are not unfounded but rather a realistic assessment of how deeply interconnected modern trade truly is.
However, instead of succumbing to fear, Malaysia should see this moment as a catalyst to diversify its trade partners, reduce reliance on any single market and strengthen regional frameworks like Asean and RCEP (Regional Comprehensive Economic Partnership).
By deepening ties with BRICS+
and pursuing new multilateral agreements, Malaysia can create a more balanced economic future while protecting key export industries like electronics and manufacturing from tariff disruptions. Thanks to Prime Minister Datuk Seri Anwar Ibrahim’s visionary leadership and diplomacy, Malaysia is already part of BRICS+, and must continue to build on it to realise its full potential.
Furthermore, while short-term contingency measures, such as targeted subsidies, tax relief and export diversification programmes, are essential to help industries
most affected by tariffs (including electronics and palm oil, particularly small and medium-sized enterprises) adapt to shifting trade dynamics, robust long-term structural reforms are even more critical.
These reforms include investing in domestic production and innovation to reduce export dependency; upgrading infrastructure and accelerating digital transformation to strengthen economic resilience; improving the quality and value-added of exports to remain competitive despite tariffs; and nurturing high-growth sectors like technology, renewable energy and services. Such strategic shifts are crucial to ensuring sustainable economic stability in an increasingly volatile global trade environment.
This moment serves as a reminder that the global economy is not a zero-sum game. In this high-stakes environment, true strength lies not in unilateral sanctions or tariffs but in the ability to negotiate and adapt.
The US’s longstanding reliance
on global demand for its “paper” currency and military might is waning as both trust in US high-tech products and capacity for global intervention decline. The emerging trend leans towards diplomacy, mutual respect and equitable trade practices – a direction that will ultimately shape the future of international relations.
As Russia’s leader and host of the latest BRICS summit succinctly put it: we are moving towards a world order that is not so much polycentric where centres inevitably compete, even to the point of conflict, for dominance, but rather polyphonic, one in which every voice must be heard. This vision underscores a shift from a unipolar or multipolar system inevitably defined by rivalry to a more inclusive framework that prioritises civilised dialogue and diversity in global governance.
As a crucial distinction, BRICS+ is not an organisation but a format – one that does not propose a new hierarchy of nations. Instead, it presents a fresh framework for relationships between nations. Its principles, articulated at the 2023 Valdai Forum, set forth a new vision for global cooperation:
An open world, free of artificial barriers between nations and peoples.
Civilisational diversity, fostering harmony among cultures.
Collective decision-making, ensuring every nation and community has a voice in matters that concern them.
Universal security and lasting peace – a self-evident necessity.
Justice for all, rejecting the creation of any new colonial empires.
Equality, ensuring no nation dominates another.
Meanwhile, the US’s attempts to reshape its economy through coercive measures will inadvertently catalyse this more balanced, polyphonic world – one in which economic resilience is built on cooperation and mutually beneficial growth rather than confrontation.
As innovation increasingly migrates to emerging markets in Asia, Africa and Latin America, the unilateral imposition of tariffs will only hasten the shift of global trade away from outdated paradigms.
The continued expansion of BRICS+ markets and the evolving nature of global supply chains will continue to offer opportunities for innovation and growth.
The current alarm over Trump’s tariff threats overlooks a key point: global markets are resilient and adaptable. While short-term volatility is inevitable, the long-term impact of these tariffs is likely to be muted as countries recalibrate their trade strategies and forge new alliances.
For Malaysia, this is a clarion call to diversify trade partnerships, strengthen domestic industries and deepen regional cooperation.
Dr Rais Hussin is the founder of Emir Research, a think-tank focused on strategic policy recommendations based on rigorous research.
Comments: letters@thesundaily.com
While short-term volatility is inevitable, the long-term impact of tariffs is likely to be muted as countries recalibrate their trade strategies and forge new alliances. – AFPPIC
