Keep Calm and Cut Trade Barriers
Avoiding a Global Trade War
Donald Trump’s long-awaited tariff hikes have provoked the expected shock and condemnation of most of the world, with belligerents threatening tit-for-tat tariffs to hit back. In this predictable political maelstrom, wiser heads must prevail to avoid a global trade war that no one will win.
The New Tariff Schedule
The tariff levels are worse than expected for many Asian countries, especially those with close links to China. However, for others with fewer restrictions, such as Singapore, the base tariff has been applied and can be reduced through negotiation. Elsewhere, outside of Asia, the EU will face 20% reciprocal tariffs along with 25% tariffs on its cars, whereas the UK may finally see some real benefit from Brexit with only the baseline 10% tariff applied to British goods, which it is now free to negotiate away since it is no longer bound by EU protectionist restrictions.
Aiming to Address Unfair Access Restrictions
The position taken by President Trump is that the US faces unfair access restrictions for its exports into many markets. These can be tariffs or other restrictions such as permits, regulations or product standards, which are non-tariff barriers to US exports. The new tariff schedule simply aims to address this issue by imposing higher tariffs on countries with restricted access to US exports and lower tariffs for countries with fewer restrictions on US exports. What could be more reasonable?
Cutting Restrictions for a More Open Market
In Malaysia, most tariffs on US products are actually quite low, but there are other restrictions such as approved permits for automobiles or even higher halal standards for many products compared with other Muslim countries. The 2025 US National Trade Estimate Report for Malaysia noted that “unfair” trade regulations, such as a 251% maximum tariff on dairy products, are a major barrier to US businesses. So, the countermeasures are to cut these restrictions and negotiate more open access to Malaysian markets for US exports. Raising tariffs would be disastrous.
Avoiding a Negative Impact
If the 24% reciprocal tariff can be negotiated down through positive reciprocal removal of restrictions, then the negative impact can be minimised. Otherwise, the impact could be big because the US is Malaysia’s second-largest single export market with nearly half of the exports being high-value electrical and electronics, including the strategically important semiconductor sector. Lower trade with the US would therefore worsen net trade, which has been trending down since mid-2023. This will drag down GDP and would require a revision of the economic growth forecast.
The impact on other Malaysian export markets and global trade as a whole could also be very negative if there is a tit-for-tat increase in their tariffs, especially by the EU. This belligerence is the real risk, not the tariffs themselves. This context helps us to understand the real underlying strategy behind the new tariffs. Contrary to what some economists have argued, this is not to raise the income of the US government nor is it to build a protective wall behind which America can retool. Both of these are long-term policies which a second-term president has no advantage from.
The aim is much more short-term, to disrupt global tariff and trade restrictions and shock as many countries as possible into the reality that tariffs and trade barriers must be cut across the board. Viewed in this context, Trump’s strategy not only makes sense, it is a much-needed breath of fresh air for international trade relations biased in favour of the EU, China, and low-cost manufacturers around the world. Malaysia should negotiate calmly and not take sides.
In conclusion, the new tariffs are a negotiating position and may be short-lived if people behave calmly and reasonably by cutting rather than raising trade restrictions in response. Malaysia should take a pragmatic approach and negotiate to reduce tariffs and restrictions, rather than escalating the situation.
Q: What are the main goals of President Trump’s new tariff schedule?
A: The main goals are to address unfair access restrictions for US exports and to disrupt global tariff and trade restrictions, in order to shock countries into cutting their trade barriers.
Q: How will the new tariffs affect Malaysia?
A: The tariffs will have a negative impact on Malaysia’s trade with the US, particularly in the electrical and electronics sector. However, if Malaysia negotiates calmly and reduces its restrictions, the impact can be minimised.
Q: Is this a protectionist move by President Trump?
A: No, this is not a protectionist move. The aim is to reduce trade barriers and promote free trade, rather than to build a protective wall behind which America can retool.