By Galvin Lee Kuan Sian

In April, the United States announced the enactment of a 24 per cent retaliatory tax on Malaysian exports, potentially causing significant disruption in trade and industrial sectors.

However, for numerous average Malaysians, the ramifications may appear intangible – figures in the billions, headlines concerning deficits, and ambiguous allusions to export limitations.

However, underneath the diplomatic rhetoric and economic terminology resides a more human concern: to what extent is Malaysia susceptible in a global economy characterised by more transactional access?

For decades, Malaysia has experienced robust export-driven growth. Our success has been established on the assurance of free markets, encompassing semiconductors, palm oil, rubber gloves and electrical machinery.

What occurs when such markets impose conditions not only on our sales but also on our domestic operations?

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz stated that Washington has stipulated four conditions for contemplating a reduction in tariffs: decreasing the trade imbalance, alleviating non-tariff barriers, enhancing technical safeguards, and augmenting strategic investment in the United States.

In theory, this may appear as technical discussions among trade ministries. But each of these demands reflects something deeper – structural dependencies, misaligned incentives, and the growing expectation that economic access must be “earned”, not assumed.

Consider the Trade Deficit

The United States claims a US$25 billion trade deficit with Malaysia, indicating that it imports more from Malaysia than it exports to it. This disparity is not malicious; it arises from global supply chains in which Malaysia has specialised in innovative manufacturing.

In the current political context, deficits are increasingly perceived not as a result of comparative advantage, but as issues to be "rectified”. Consequently, we may be compelled to increase imports of U.S. goods, regardless of their cost-competitiveness, merely to balance the accounts. In short, access becomes conditional on consumption.

Additionally, there exists the concern of non-tariff obstacles. An example mentioned was the laborious procedure of halal certification. This may appear to be a minor regulatory concern, yet it underscores a vital point: in international trade, the impression of friction is as significant as the real regulation.

Although Malaysia justifiably upholds its regulatory requirements, if our processes are regarded as opaque, inconsistent or sluggish, they become a valid point of leverage for trading partners.

That is not merely a diplomatic issue; it is a challenge to business competitiveness. The call for "technology safeguards" is even more illuminating. The United States seeks guarantees that sensitive technologies, especially semiconductor components, will not be redirected to nations subject to U.S. export prohibitions.

This is beyond mere compliance; it pertains to trust. This indicates that Malaysia is perceived as a potential transshipment risk. This should stimulate profound reflection for a nation aspiring to establish itself as a semiconductor hub.

The final demand, strategic investment, is perhaps the most ironic. U.S. officials urge Malaysia to increase investments in industries that correspond with U.S. industrial priorities.

According to Tengku Zafrul, government-linked corporations and investment firms have already invested about US$45 billion in U.S. bond and equity markets.

The communication is unequivocal: passive capital is insufficient. Investment must now be purposeful, strategically focused, aligned and demonstrably helpful of local economies. In other terms, even capital need strategic endorsement.

So where does this leave us? Initially, we must dispel the misconception that global trade is exclusively regulated by economic principles. Trade access is increasingly influenced by political perceptions, industrial strategy, and national security considerations.

The Era of Frictionless Globalisation is Fading

A new reality has emerged where tariffs, limitations, and conditions are utilised strategically, not for punishment, but for realignment. Secondly, Malaysia must contemplate the implications of a reactive approach. The tariff conversations are not spontaneous; they are indicative of enduring vulnerability.

Our over dependence on a limited range of export markets and sectors renders us vulnerable. Our regulatory regimes, albeit justified domestically, may not consistently endure international examination.

Our story as a neutral, rules-based trading nation will remain valid only if we consistently exhibit transparency, responsibility and competence across all economic levels.

Thirdly, and most crucially, the average Malaysian must recognise trade not as an abstract issue for the elite, but as a one that directly impacts their livelihoods.

Tariffs influence prices, employment, investments and prospective opportunities. Should corporations have elevated export expenses, they may reduce expenditures in other areas.

If international partners perceive Malaysia as a compliance concern, they may relocate operations to alternative markets. This issue pertains not to geopolitics, but to domestic economic concerns. The present impasse lacks a straightforward resolution.

Malaysia aims towards the complete elimination of tariffs, rather than merely a reduction. That is a commendable and essential objective. However, attaining it will need more than kind diplomacy.

It necessitates self-evaluation, organisational restructuring, and strategy realignment. Ultimately, this moment is not just about negotiating a better deal with the United States; it’s about rebuilding our credibility, recalibrating our strategy, and reminding ourselves that in today’s global economy, sovereignty is exercised not just through borders, but through standards, systems, and trust.

-- BERNAMA

Galvin Lee Kuan Sian serves as Lecturer & Programme Coordinator for the Diploma in Business programme at the School of Diploma & Professional Studies, Taylor’s College. He is also pursuing his PhD in Marketing at the Asia-Europe Institute, Universiti Malaya.