Trump's presidency reshapes US-Malaysia ties

Malaysian Reserve

22-04-2025

The US has long been one of Malaysia's key trading partners, with cooperation in trade, education, security and cultural
by AUFA MARDHIAH
DONALD Trump's return to the White House is already reshaping global diplomacy, with Malaysia feeling the ripple effects.
His revived 'America First' agenda — now in full force — includes sweeping tariffs, hardline immigration policies, renewed withdrawal from climate commitments and a shift toward unilateral foreign policy.
For Malaysia — an export-oriented economy and diplomatically neutral South-East Asian (SE Asian) nation — the shift marks a new phase in its complex relationship with Washington.
The US has historically been one of Malaysia's top trading partners, with bilateral cooperation spanning trade,
education, security and people-to-people ties. But under Trump's second presidency, the dynamic is being redefined — marked by uncertainty, recalibration and strategic caution.
Tariffs Reintroduced, Exports at Risk
Trump has wasted no time in reimposing broad-based tariffs on foreign imports — 10% across the board, and up to 245% on Chinese goods.
For Malaysia — which exported RM167 billion worth of goods to the US in 2023, nearly half of it from the electrical and electronics (E&E) sector — the implications are serious.
Economist Dr Geoffrey Williams said the impact of the tariffs could be significant, as the US is Malaysia's second-largest single export market.
'Half of our exports are in electrical and electronics, so this sector could be hit hardest,' he told The Malaysian Reserve (TMR).
The E&E industry has long been the backbone of Malaysia's industrial output, employing hundreds of thousands across Penang, Selangor and Johor. While some companies may be able to absorb higher duties, the long-term competitiveness of Malaysian goods is at risk.
Williams warned that a prolonged decline in demand could pull Malaysia's GDP toward the lower end of government projections.
'Growth in Malaysia is likely to be at the lower end of the 4.5% to 5.5% range,' he said, while noting that the impact on inflation is expected to be minimal.
Despite the risks, he pointed out that Malaysia is seen as more resilient to external shocks than many of its regional peers due to strong domestic fundamentals.
Still, the short-term turbulence has not gone unnoticed. Williams warned that uncertainty will likely persist in both stock and foreign exchange (forex) markets.
Diplomatic Tightrope
With Trump's combative trade stance already underway, economist and geostrategist Prof Azmi Hassan believes Malaysia's best strategy is to avoid drawing attention from the US administration.
'Let the status quo remain. Don't instigate Trump. Although Malaysia holds the ASEAN Chairmanship this year, Trump does not view ASEAN as a priority — and that might actually work to our advantage,' he said.
Azmi pointed to past incidents where Trump-era defence officials showed limited awareness of ASEAN affairs.
'The Secretary of Defence didn't even know what ASEAN was during confirmation hearings.
'That's a good thing. If we are off Trump's radar, we avoid punitive outcomes,' he said, referring to coverage from The Washington Post.
At the same time, he argued that Malaysia should neither overtly oppose nor align with Trump's policies.
'We cannot instigate him because he will respond with penalties. But at the same time, we can push back a little if it affects our sovereignty, while offering enough praise so he doesn't view Malaysia or ASEAN as adversaries of the US,' he added.
Azmi said Malaysia has so far managed to maintain neutrality in the US-China rivalry.
'We haven't demonstrated that we are more aligned to China, and we should keep it that way,' he said.
The BRICS Dilemma
Malaysia's engagement with BRICS — the acronym stands for Brazil, Russia, India, China and South Africa — particularly its interest in de-dollarisation discussions, has drawn scrutiny under Trump's administration, which views the economic bloc as a threat to US financial supremacy.
According to Bloomberg, Trump has specifically linked BRICS' efforts to 'destroy the dollar' with what he calls 'hostile foreign economic warfare.'
Azmi further highlighted that Trump is fully aware of BRICS' intention to move away from the greenback.
'Since Malaysia is seen as a BRICS partner, we could be perceived as complicit — and that could trigger Trump's punitive trade instinct,' he added.
However, Azmi noted that internal disagreements within BRICS — particularly India's resistance to a shared currency — mean that de-dollarisation is unlikely to materialise soon.
Malaysia has so far managed to maintain neutrality in the US-China rivalry, says Azmi
Trade Wars on the Horizon?
Trump's reimposed tariffs have already sparked debates in Beijing and Brussels, raising fears of a new global trade war.
Williams had earlier predicted a broader trade war if the European Union (EU) and China responded with retaliation tariffs.
'This would be a bad policy with disastrous consequences all around,' he told TMR.
He added that smaller countries such as Malaysia should avoid confrontation altogether.
'Smaller countries should cut tariffs and restrictions to reduce the reciprocal measures through negotiations,' he added.
Despite the escalating rhetoric, Williams views the tariffs as part of Trump's typical negotiation tactics.
'The best strategy for all countries is to cut tariffs and trade restrictions — and bring in a new era of free trade.'
He further highlighted that Malaysia's relatively low tariff structure is unlikely to significantly impact foreign direct investment (FDI) and may continue to make the country appealing to foreign investors.
Williams views the tariffs as part of Trump's typical negotiation tactics (pic: TMR)
Malaysia's Role in US-China Decoupling
The US-China trade war, which began during Trump's first term, is now deepening under his renewed leadership. As the US attempts to sever reliance on Chinese supply chains, Malaysia's manufacturing sector could benefit — if it can maintain neutrality.
Domestically, local news reports indicated that the earlier wave of decoupling saw multinational firms shift manufacturing operations to Penang, Kulim and Johor to avoid tariffs on China-based production.
But Malaysia also faces risks if seen as facilitating backdoor transshipments of Chinese goods. The government has already warned against such practices, knowing full well that Trump's administration is likely to expand anti-circumvention investigations.
Immigration Clampdowns, Talent Migration
Separately, Trump's reinstatement of stricter immigration policies has raised concerns among Malaysian students and professionals.
According to data from the US Department of Homeland Security, over 7,000 Malaysians were studying in the US last year, many in Science, Technology, Engineering and Mathematics (STEM) fields.
New visa processing delays and restrictions have made planning uncertain. Meanwhile, American work visa programmes — including H-1B and Optional Practical Training (OPT) — are being curtailed, narrowing pathways for skilled migration.
While this could reduce Malaysia's brain drain, it comes at the cost of global exposure and experience. Experts warn that the country could lose out on remittances and international networking opportunities, with many students likely to redirect their academic ambitions toward the UK, Australia or Canada.
Climate Cooperation Stalls
In one of his earliest moves since returning to office, Trump once again withdrew the US from the Paris Climate Agreement. His administration has also scrapped several clean energy mandates and lifted restrictions on oil drilling.
This policy reversal comes as Malaysia is working to position itself as a green economy leader in SE Asia.
The loss of US climate leadership could weaken global pressure and reduce available funding for renewable energy (RE) projects, carbon market development and environmental cooperation.
Malaysia's state oil firm Petroliam Nasional Bhd (Petronas) could also feel the impact. Trump's push for energy independence has triggered a surge in US oil and gas (O&G) production, putting downward pressure on global prices. This could squeeze revenue for Malaysia, whose economy remains partially reliant on petroleum exports.
Still, Malaysia is unlikely to reverse its climate commitments. Policymakers remain aware of the long-term risks posed by climate change, including floods, biodiversity loss and food insecurity.
South China Sea Security Ties
In the area of national security, Trump's defence team has resumed freedom-of-navigation patrols in the South China Sea, taking a hardline stance against China's territorial claims.
In March, the US Navy deployed two carrier strike groups to contested waters as part of its Indo-Pacific deterrence operations.
Malaysia, with its own overlapping claims with Beijing, may find itself in an increasingly tense environment.
While a strong US presence can help deter Chinese aggression, Malaysia prefers to manage disputes through ASEAN-led diplomacy. Azmi said Trump's limited interest in ASEAN forums may actually help Malaysia avoid direct pressure to choose sides.
'If the US isn't paying attention, we won't be pushed into uncomfortable positions,' he added.
However, less engagement also means fewer security and capacity-building initiatives. Malaysia has previously benefited from American military education programmes, maritime domain awareness tools and disaster response training — all of which face budget cuts under Trump's current fiscal agenda, as reported by Washington-based Foreign Policy.
Retreat of US Soft Power in Malaysia
Perhaps the most immediate consequence of Trump's return is the sudden halt of US funding to civil society and media organisations.
Earlier this month, BenarNews — a regional news platform supported by the US Agency for Global Media — suspended its operations after the administration withheld funding.
The announcement was made on its website on April 3, citing a 'lack of operational support due to funding uncertainty.'
The shutdown of BenarNews, which had reported on Malaysian politics, governance and extremism, symbolises a retreat of US soft power in South-East Asia.
Meanwhile, Al Jazeera and Channel News Asia reported that Fulbright scholars and Malaysian NGOs have seen funding disruptions.
The North-South Initiative lost 40% of its operational budget, affecting shelters for migrant workers. Wildlife conservation projects have also similarly been suspended due to stop-work notices tied to US government reviews.
These cuts are part of a broader freeze on foreign aid and exchange programmes. For Malaysia, the loss of these partnerships means fewer opportunities for academic, environmental and civil society collaboration.
With Trump back in office, Malaysia must adapt quickly. Economic diversification, diplomatic neutrality and regional cooperation will be key pillars in navigating the shifting geopolitical landscape.
In this new era of transactional diplomacy, Malaysia's approach will likely remain pragmatic: Maintain open channels, avoid direct confrontation and continue strengthening ties with other global partners.
As Trump reshapes global systems, smaller economies like Malaysia must walk a careful line — engaging, adapting, but not provoking.
This article first appeared in The Malaysian Reserve weekly print edition