US Tariffs: Malaysia's proactive strategies come at critical time

Borneo Post

19-05-2025

Charts that show the reciprocal tariffs the US seeks to charge other countries are displayed at the James Brady Press Briefing Room of the White House on April 2, 2025 in Washington, DC. — AFP photo
KUCHING (May 19): The Malaysian government's six-pronged strategy to ensure economic stability in the face of retaliatory tariffs from the United States has been lauded as proactive and timely.
Announced by Prime Minister Datuk Seri Anwar Ibrahim during a Special Session of the Dewan Rakyat on May 5, the government's plan addresses both short- and medium-term economic stability and national interests.
Key components include close monitoring of economic indicators, continued negotiations, support for affected exporters (particularly SMEs), and the cultivation of stronger regional ties and the pursuit of new markets.
The strategy also involves accelerating development project implementation and approvals, alongside ongoing economic reforms under the Madani agenda.
Datuk Dr Khairuddin Abdul Hamid
Universiti Teknologi Sarawak (UTS) vice-chancellor Prof Datuk Dr Khairuddin Abdul Hamid emphasised that these measures are a considered response, not a knee-jerk reaction.
'If these six strategies are implemented swiftly and effectively, I believe the economic impact of the US tariffs will be minimal,' he stated.
Khairuddin noted the significance of electrical and electronic equipment and components in US-Malaysia trade.
However, he expressed confidence that this sector could weather the tariffs, provided global demand remains robust.
'As long as global demand for these goods remains high, demand from other countries will persist, and these industries will not be severely affected,' he explained.
To shield SMEs from the brunt of the tariffs, Khairuddin stressed the importance of exploring new market opportunities for Malaysian products.
He advocated leveraging Malaysia's 2025 Asean chairmanship to expand market access within the Asean bloc.
'We cannot rely solely on traditional markets; the exploration of new markets is essential,' he added.
Dr Yii Kwang Jing
Meanwhile, Dr Yii Kwang Jing, associate dean of Accreditation and Curriculum Enhancement and Senior Lecturer at Swinburne University of Technology Sarawak Campus, offered a similarly optimistic outlook, suggesting that the tariffs need not spell disaster for Malaysian exporters.
Yii highlighted Malaysia's strategic position as 2025 Asean chair, with access to a 660-million-consumer market, poised to absorb trade as US markets potentially contract.
He pointed to the Asean Trade in Goods Agreement (Atiga) and its zero-tariff schedule as a crucial safety net.
'From vehicle spare parts in Penang to cocoa products in Sabah, shipments can now move across regional borders with minimal paperwork and near-zero duties,' he stated.
He further emphasised the role of the Madani Government's digital trade portal in facilitating SME access to these regional trade routes, reducing transaction times from months to days.
The Regional Comprehensive Economic Partnership (RCEP) (Asean+3) also provides a platform to expand trade, with simplified rules enabling tariff-free entry for Malaysian semiconductors into China, Japan, and South Korea.
'Halal food producers, green technology suppliers, and chip manufacturers suddenly find three large and readily accessible customer bases,' Yii noted.
The upcoming Asean Digital Economy Framework Agreement (Defa) is expected to be a 'game-changer,' streamlining compliance for e-commerce-focused fintech startups through harmonised regulations on data, e-payments, and cybersecurity.
'Consultant estimates suggest the digital economy could contribute US$1 trillion to Asean's gross domestic product (GDP) by 2030, presenting significant opportunities for Malaysian digital firms,' Yii explained.
He also underscored the political advantage conferred by Malaysia's 2025 Asean chairmanship, emphasising the collective bargaining power it provides.
'This Chairmanship enables us to align standards that benefit Malaysian businesses while amplifying our voice in global trade discussions,' he stated.
'In essence, diversification is not merely an option but a strategic imperative. By capitalising on Asean tariff reductions, the broader reach of RCEP, and the forthcoming digital agreement, Malaysia can pivot from a US-centric trade environment to a regionally focused one,' he argued.
Addressing concerns about Malaysia's leverage in negotiations with the US, Yii acknowledged the US' historically firm stance on trade.
However, he pointed out Malaysia's past successes in securing concessions by highlighting areas of mutual economic benefit.
He cited the 2020-2023 palm oil dispute, where the US initially considered anti-dumping duties. Malaysia countered by presenting audited data from the Malaysian Sustainable Palm Oil (MSPO) Certification scheme, detailing US companies' reliance on palm oil, and signaling its willingness to pursue legal action at the World Trade Organisation (WTO).
'Ultimately, the US abandoned the proposed tariffs in the face of widespread opposition from various stakeholders, including US importers,' Yii said.
He also highlighted Malaysia's recent success in mitigating the impact of US export controls on its semiconductor industry, initially targeted at China.
By emphasising Malaysia's 13 per cent share of global chip packaging and testing and Intel's substantial investments in Penang, the government successfully argued that broad restrictions would harm US competitiveness.
'These instances demonstrate that 'smaller' economies can influence outcomes when they occupy strategic positions within global value chains, such as in advanced packaging, nitrile gloves, or sustainable palm oil,' Yii concluded.
'Malaysia must continue to leverage robust data, build coalitions with diverse stakeholders, and be prepared to pursue WTO litigation when necessary.' Khairuddin Abdul Hamid lead US Tariffs Yii Kwang Jing