KUALA LUMPUR – Malaysia had long anticipated the possibility of steep US tariffs such as the newly imposed 24% “Liberation Day” tariffs, and has taken proactive steps to reduce its impact, said Investment, Trade and Industry Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz.
Tengku Zafrul emphasised that Malaysia has diversified its export market in preparation for such developments, citing strong gains in Africa, where Malaysia recorded new export milestones for Kenya, Oman, and Namibia. Notably, Angola registered a 59.3% increase in export value, followed by Ethiopia (56.4%), Egypt (53.6%) and Algeria (27.9%).
Apart from expanding into African markets, Tengku Zafrul said Malaysia had also restarted free trade agreement (FTA) negotiations with the EU and South Korea last year, and is now eyeing deeper trade with Asean, where Malaysia’s current trade volume with the bloc remains under 25%.
As Malaysians grapple with the implications of the 24% tariff hike announced by US President Donald Trump’s administration, Tengku Zafrul took to social media to explain how tariffs work, using the analogy of shopping for clothes.
In an explainer video posted on X, Tengku Zafrul called upon viewers to imagine the US as a fashion store owner who is disgruntled with the fact that consumers are purchasing Chinese-made shirts that are sold cheaper than American-made.
“Imagine if China sells these shirts to the US at the price of US$100 per piece previously, the price is now (raised) to US$154 with the 54% tariffs imposed by the US.
“The American store owner thinks that when imported clothes become expensive, local consumers will no longer buy them ,and American firms that have been operating overseas will move their factories back to the US.
“But when imported goods get pricier, who would have to bear the importing costs? It is the American customers. Those who were used to buying these shirts for US$100 would have to pay US$154 now,” said Tengku Zafrul.
He then pointed out that many goods sold in the US will become pricier, forcing customers to spend less due to inflation. The reduced purchasing power would then create a sluggish economy, he added.
Tengku Zafrul also said that countries exporting their goods to the superpower nation are unhappy with the tariff push, as their products would not sell well in the US market due to the price hike. These affected countries would then retaliate by imposing their own tariffs on American products.
“The European Union used to sell cars to the US, which were subject to tariffs, and now the EU has imposed tariffs on American soy.
“If all countries resorted to this move, all goods would become pricier and the global economy would slow down due to reduced demand. Everyone would suffer,” Tengku Zafrul added.
The minister also clarified that Malaysia was hit by tariffs, though at a much lower rate than its neighbours – Vietnam (46%), Thailand (37%), and Indonesia (32%). Still, with 16% of Malaysian exports going to the US, those goods will now become more expensive and less competitive.
Tengku Zafrul also underscored that Malaysia’s domestic economy remains a key strength, with 60% of its growth driven by domestic spending. He added that the National Geoeconomic Command Centre, chaired by Prime Minister Datuk Seri Anwar Ibrahim, is currently formulating comprehensive measures to address the tariff challenge.
“At the same time, we will resume negotiations with governments and companies to seek win-win solutions for all. Believe (us), the government would always work on ensuring that Malaysia’s economic interest, and its people are protected as best as we can,” assured Tengku Zafrul.
Miti has confirmed that Malaysia will not impose retaliatory tariffs on American goods, and is instead actively engaging with US authorities to seek remedies that uphold the spirit of free and fair trade.
Economists have responded to the tariff announcement by recommending that Putrajaya avoid retaliation and instead ease trade restrictions and tariffs on American goods to help persuade the US to reduce its imposed rates. – April 6, 2024