Look within, say experts and industry groups
Centre for Market Education chief executive officer Dr Carmelo Ferlito said while it was encouraging that Malaysia had sent a delegation to Washington to discuss the issue with the US, it was also important for the country to "look within".
Ferlito said that this is because while tariffs are negotiated at a government-to-government (G2G) level, business was conducted at a business-to-business (B2B) level.
"There is merit for new opportunities where trade diversification and alternatives are concerned," he told the New Straits Times.
"But we have to be clear that trading partners cannot be changed overnight because trade happens between businesses, not countries per se."
A 10 per cent export loss to the US cannot easily or necessarily be shifted to another market like China or the European Union, he said, as it boils down to agreements between firms in two countries.
"Can a US importer find an alternative supplier domestically or from another country at the same or better price after the tariff is imposed?
"What are the transaction costs involved in such a search? Can the Malaysian firm find a European customer to replace the American one, in case the American one is lost? How long will it take?"
Ferlito said the tariff issue should not be viewed from an aggregate perspective without considering "microfoundations" because in the economy, everything happens at a "microlevel".
"The macro level exists only in the statistics books."
He said each transaction is the consequence of many other micro transactions, interrelated in a way which cannot be changed overnight or as a consequence of an interstate agreement.
Ferlito said there were measures that Malaysia could take beyond tariff discussions and exploring other markets, including non-tariff barriers.
"We can take a leaf from Indonesian President Prabowo Subianto, who called for simplifying and streamlining regulations to make to increase competitiveness and attract investments."
"Such a measure would help boost investments, not just foreign direct investments (FDI) but also domestic direct investments (DDI)."
This, in turn, could help soften the blow from any impact of the tariffs once the 90-day pause on the measure ends, he said.
During the special parliamentary session on May 5, Prime Minister Datuk Seri Anwar Ibrahim outlined several measures to address the US tariff situation.
These include RM1.5 billion in financial aid for SMEs and the fast-tracking of infrastructure projects to stimulate domestic economic activity.
In response, business groups say internal strengthening is just as critical as external support.
The Federation of Malaysian Manufacturers (FMM) backed the formation of a National Supply Chain Council to address vulnerabilities across key sectors.
"Private sector participation is essential to ensure that the Council's strategies are grounded in operational realities," said FMM president Tan Sri Soh Thian Lai.
FMM also urged the swift rollout of the Government Procurement Act, calling it vital to "stimulating domestic demand and enhancing national production capabilities."
It added that government-linked companies should be subject to "a clear mandate or strong policy encouragement to increase their procurement from local manufacturers."
Small and Medium Enterprises Association (Samenta) noted that non-exporting SMEs make up the bulk of Malaysia's business landscape.
"These businesses... will be equally impacted as input costs rise, supply chains tighten, and consumer spending begins to contract," said president Datuk William Ng.
He called on the government to "pause all new and planned cost increases on SMEs" and freeze compliance requirements that could push more businesses into distress.
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The Star
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