3 days ago
- Business
- New Straits Times
Trump's steel tariff hike raises alarm for Malaysian exporters
KUALA LUMPUR: The United States' plan to double steel tariffs under President Donald Trump could have far-reaching effects on global trade and hit Malaysian steel exporters hard.
Economists warn that the steep increase signals a renewed push for protectionism and could erode Malaysia's competitiveness unless exemptions or adjustments are secured.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the move reflects the Trump administration's persistent reliance on import tariffs, despite recent legal setbacks.
"This clearly shows that fixation on import tariffs as a policy instrument as a way to fix industry imbalances by the Trump administration has never receded," he told Business Times.
Last week, the US Court of International Trade ruled against Trump's earlier tariff move, citing inconsistencies with US trade laws. However, Afzanizam noted that the administration remains unmoved.
"It remains to be seen how the domestic capacity would be able to meet the domestic demand for steel and if there is any gap, it would result in disruption to various industries that rely on steel as their input," he said.
Trump is also pushing a proposed US$14 billion investment in domestic steel production through a partnership between US Steel and Japan's Nippon Steel, though the deal still awaits review.
On May 30, Trump announced that tariffs on steel and aluminium imports will be doubled from 25 per cent to 50 per cent, effective this Wednesday.
He said the move is meant to protect local steelmakers, ensure supply security and reduce dependence on Chinese imports.
Malaysia's steel exports to the US are limited, but local players such as Ann Joo Resources Bhd and Hiap Teck Venture Bhd have warned that diverted steel could flood Southeast Asia, worsening oversupply.
Prices of domestic billet and steel bar prices had already dropped to four-year lows at end-2024, with dumping risks rising, especially from China and Vietnam.
Industry players fear the latest hike could deepen existing market imbalances, leaving Malaysia more exposed to price pressures and trade volatility.
Looking ahead, Afzanizam said Malaysia could still work toward securing a more favourable universal tariff rate, possibly around 10 per cent.
He also urged a broader review of Malaysia's growth plans to prepare for global trade instability.
"In the best case perhaps Malaysia could get the universal tariff rate of 10 per cent. In a nutshell, it is best to put a higher tariff rate as a basis to recalibrate growth strategy going forward," he added.
Clock ticking on 90-day window
Meanwhile, the new tariff hike comes as several countries face mounting pressure under Trump's "reciprocal tariff" framework.
In April, the US offered a 90-day pause to negotiate new country-specific rates based on trade imbalances. The window is expected to close early next month.
With a RM136.88 billion trade surplus with the US last year, Malaysia is likely to come under review.
Economist Dr Geoffrey Williams said the tariff hike shows Washington's growing impatience, especially with the European Union's reluctance to engage.
"The EU in particular has been stalling, and they represent significant steel exports to the US. Unfortunately, this belligerent stance in Europe has implications for everyone else, especially in Malaysia," he said.
As the 90-day pause nears its end, Williams warned that Malaysia may still be affected, even if its own talks with Washington are progressing.
"We are almost halfway through the 90 day pause period and unless negotiations speed up the deadline will be missed. So the signal is to get serious or pay the consequences," he stressed.
