Sign in Subscribe
Tariffs

US Tariff Push: Malaysia Seeks Better Trade Terms, Economists Say

Strategic Insights

— 2 min read

Economists believe that Malaysia may still secure better tariff terms with the United States before the August 1 deadline, despite concerns over trade imbalances. US Secretary of State Marco Rubio has signaled openness to negotiations to reach mutually beneficial trade deals, suggesting that a win-win solution is possible. However, Malaysia needs to address specific concerns raised by the US, including non-tariff barriers in areas such as halal certification processes and regulations governing foreign bank branches.

Key Takeaways:

  • US Secretary of State Marco Rubio has expressed openness to negotiations with Malaysia to reach mutually beneficial trade deals, despite concerns over trade imbalances.
  • The underlying objective behind the US tariff push is likely aimed at gaining greater market access to Malaysia's economy, according to Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.
  • Malaysia needs to address specific concerns raised by the US, including non-tariff barriers in areas such as halal certification processes and regulations governing foreign bank branches.
  • US officials signal that trade imbalances have taken a serious toll on their economy, which is why tariffs are the policy instrument used to address these issues.
  • Malaysia's current position on trade negotiations "appears very stubborn" and may make reaching a deal more difficult, according to economist Dr Geoffrey Williams.
  • A presidential appearance by US President Donald Trump at the Asean Summit in October may help cement relations between the US and Asean, while also serving as a highlight of Malaysia's Asean chairmanship this year.
  • Tariff issues may overshadow the summit unless a solid deal is reached beforehand, despite Rubio's comments on the US's openness to negotiations.

Statistics:

  • The US has flagged several non-tariff barriers in its US Trade Representative Report on Foreign Trade Practices released in March.
  • These non-tariff barriers included Malaysia's halal certification processes, approved permits in the automotive sector and regulations governing foreign bank branches.
  • The US has imposed a 25% import duty on Malaysian goods effective August 1, citing the need to "protect domestic industries" from what they claim are unfair trade practices.
  • Malaysia was initially hit with a 24% tariff rate, but implementation was deferred by 90 days to allow time for negotiations.

Sources:

  • Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid
  • US Trade Representative Report on Foreign Trade Practices
  • Asean Foreign Ministers' Meeting (AMM)
  • US Secretary of State Marco Rubio's comments at the 58th Asean Foreign Ministers' Meeting
  • US President Donald Trump's comments on trade policies and tariffs
  • Economist Dr Geoffrey Williams' comments on trade negotiations and the Asean Summit

Read more