Economists: Malaysia should leverage US-China tariff pause to reposition itself

The Star

14-05-2025

KUALA LUMPUR: The 90-day tariff pause between the United States (US) and China offers Malaysia a critical opportunity to reposition itself economically, according to economists.
After their first round of talks in Switzerland over the weekend since US President Donald Trump initiated tariffs on April 2 on every country, the US and China have struck a deal to reduce reciprocal tariffs by 115 percentage points.
Under the deal, the US will lower its tariff on Chinese imports from 145 per cent to 30 per cent and China will reduce its tariff on US goods from 125 per cent to 10 per cent.
Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi MARA's department of economics and financial studies, told Bernama that Malaysia must capitalise on this period of relative stability to diversify its trade portfolio and strengthen its economic resilience.
He said key strategies include deepening ASEAN-led partnerships through the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US-China trade.
"Malaysia should (also) enhance export competitiveness by attracting firms looking to diversify their supply chains, particularly in high-value sectors such as semiconductors and renewable energy, while also advancing domestic reforms to position itself as a regional production hub through improved business operations, digital infrastructure, and workforce development,' he said.
He also stressed the importance of monitoring geopolitical risks and preparing for potential disruptions.
He said firms need to develop contingency strategies to address possible US-China decoupling scenarios by exploring new export markets and creating supply chain buffers.
"A proactive approach will help Malaysia manage trade uncertainties and seize emerging global opportunities,' he said.
Commenting on the broader implications of the deal, Idham said the 90-day suspension offers temporary relief to global trade tensions and could revive activity in sectors like electronics, agriculture, and manufacturing.
However, he cautioned that the pause alone does not guarantee stability.
Although the 90-day period provides an opportunity for dialogue, it fails to secure lasting peace without meaningful concessions, which could lead to a resumption of the trade war while at the same time expanding limitations on technology and investment.
"Malaysia should remain vigilant, as the end of the truce could lead to renewed trade tensions, disrupting regional exports and investment flows,' Mohamad Idham said.
Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said Malaysia should respond to the development by actively pursuing new free trade agreements (FTAS) with global partners.
"Malaysia should avoid taking sides in the ongoing trade tensions and instead focus on advocating clear, consumer-benefiting free trade policies that foster innovation.
"This situation presents an opportunity for Malaysia to push for new FTAS, not just to lower tariffs, but also to tackle non-tariff barriers - such as regulations and quotas - that can hinder trade.
He further emphasised that the 90-day pause represents a highly positive signal.
"Trump shook the table and now the players are about to sit down for a new round of cards, trying to define new rules.
"Trump was not aiming at tariffs per se but at pushing other countries to negotiate with him to reshape global trade,' he said.
Lee Hwok Aun, a senior fellow at the ISEAS-Yusof Ishak Institute's Malaysia Studies Programme in Singapore, said the 30 per cent tariff on China remains substantial.
"It is unclear whether this reprieve will avert a US recession and wider global contagion,' he said, adding that the truce reflects domestic pressures faced by the US and China.
"Countries negotiating trade deals, especially Malaysia and its Southeast Asian neighbours caught in the US-China rivalry, should proceed tactfully and bide their time while awaiting greater clarity on the direction and substance of US-China negotiations,' he said. - Bernama