Malaysia unlikely to escape Trump tariffs, says former US trade negotiator
Last month, Donald Trump announced a 24% tariff on most Malaysian goods entering the US, which was later put on hold for 90 days to allow for trade negotiations.
PETALING JAYA : A former US trade negotiator says Malaysia is unlikely to succeed in completely eliminating the 24% tariff rate imposed by US president Donald Trump.
Stephen Olson, who represented the US in negotiations for two free trade agreements, said Malaysia would have limited leverage in tariff talks.
He said Trump is 'unlikely to bat an eye' even if Malaysia threatened the US with 500% tariffs.
Olson suggested that Malaysia raise other potential 'pressure points' during negotiations, such as corporate and geopolitical issues.
He said Malaysian negotiators should also emphasise the ways in which the US benefits from its trade and economic relations with Malaysia.
'To be brutally honest, I don't see any scenario in which 0% tariffs are within the realm of possibility (for Malaysia) here,' he said.
The US has been Malaysia's third largest trading partner since 2015, with the total trade between the two countries surging 29.9% to RM324.91 billion last year.
Olson, a visiting senior fellow of the Yusof Ishak Institute in Singapore, said commitments to purchase more US products may find favour with Trump, who uses trade balances to gauge whether a country 'wins or loses' in trade.
Trump takes the view that a trade deficit with another country indicates that the country is 'beating' the US.
In view of that, Olson said Malaysian trade officials would have to assess whether the cost of making additional purchases from the US would outweigh the benefits of securing reduction or elimination of tariffs.
Last month, the US announced tariffs on goods imported from some 60 countries, set at varying rates. Malaysia was slapped with a 24% tariff on most of its exports to the US.
The tariffs were subsequently paused for 90 days to allow for trade negotiations. However, a 10% blanket duty remains in place on almost all imports into the US.
On Monday, investment, trade and industry minister Tengku Zafrul Aziz said the country's main objective was to secure the removal, or at the very least, a significant reduction of the tariff imposed on Malaysian goods.
He said Putrajaya's team for the talks, which started on Tuesday, is led by Mastura Ahmad Mustafa, the ministry's secretary-general for trade. Washington has named an assistant US trade representative as its chief negotiator.
Olson said although domestic political pressures are likely to be a key consideration, the Malaysian delegation must take into account an 'even more important factor'.
'And that is the fact that the US president views himself as the 'trade negotiator in chief',' said Olson.
'How much authority do US negotiators actually have? Will the final call actually be made in the Oval Office? It's unclear right now.'
Tengku Zafrul, who led a Malaysian delegation to Washington last month, told the media that American bureaucrats had expressed concern about Malaysia's non-tariff barriers and their country's US$25 billion trade deficit with Malaysia.
However, the minister said he reminded them that Malaysian GLCs had invested nearly US$45 billion in US equity and bond markets.
At the press conference, Tengku Zafrul also said he had assured Washington that Malaysia would maintain an open and neutral trade policy, which would include good ties with partners such as China, the European Union and Gulf Cooperation Council countries.
The minister also said the US has made four demands, calling on Malaysia to address non-tariff barriers, reduce the trade deficit, safeguard US technology, and increase investment in American industries.
Malaysia's halal import restrictions and Bumiputera equity requirements have been listed as non-tariff barriers in the Office of the United States Trade Representative's 2025 National Trade Estimate Report.
Olson said he was uncertain whether Malaysia's US$45 billion investment in US markets, highlighted by Tengku Zafrul, gave Putrajaya any meaningful bargaining power.
He said that would largely depend on how much Trump cared about the constituencies or business interests that would be adversely affected if Malaysia pulled these investments.
Olson also said Zafrul's pledge of trade neutrality was unlikely to win much favour with Washington.
'The Trump administration seems to be looking for something much more than neutrality in these negotiations – it wants countries to join US efforts to isolate China,' he said.
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