KUALA LUMPUR – US President-elect Donald Trump’s threat to impose 100% tariffs on countries within the intergovernmental bloc BRICS should not spook Malaysia, despite it being accepted by the bloc as a partner country recently, said economists.
Earlier this month, Trump reportedly issued a threat against the bloc, which he accused of trying to introduce a new currency and undermine the US dollar.
“We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy.”
“They can go find another ‘sucker’! There is no chance that BRICS will replace the US dollar in international trade, and any country that tries should wave goodbye to America,” Trump posted on social media, as quoted by CNN.
British economist Geoffrey Williams of Williams Business Consultancy Sdn Bhd said, given Malaysia’s status as a partner country and not a full-fledged member of the bloc, it would not be directly impacted by the Republican president-elect’s tariff threat.
Meanwhile, economist and adjunct lecturer at Universiti Teknologi Petronas, Samirul Ariff Othman, said that Malaysia’s partner country status provides a protective buffer against Trump’s threat.
“(Therefore,) Malaysia should not ‘lose sleep’ over Trump’s fiery threats to slap 100% tariffs on BRICS nations,” he told Scoop.
Both of them said the country has a large oil and gas sector that trades in the greenback, which creates a “steady anchor” against possible economic retaliations by Trump.
No room for Malaysia’s complacency
Samirul, however, stressed that Malaysia could not afford to be complacent in a world where “global trade can shift faster than a viral tweet”.
He pointed out that while Malaysia is not directly in the crosshairs, the broader impact of Trump’s trade war rhetoric – if acted upon – “could rock the global economic boat, and Malaysia must be prepared to adjust its sails”.
“Global trade flows are interconnected, and any turbulence in BRICS’ economies could indirectly impact Malaysia’s markets, supply chains, and regional trade dynamics. (Additionally) Trump’s rhetoric also reflects deeper tectonic shifts in the global order, as BRICS pushes back against US dollar dominance – a push that Malaysia cannot ignore,” he added.
Meanwhile, Yeah Kim Leng, a professor at Sunway University said that Malaysia’s exports to the US would likely grind to a halt if Trump were to impose a 100% tariff, with the threat likely to delay the country’s participation as a full member if admitted into BRICS.
“(However) such punitive unilateral tariff will likely be avoided through negotiations given the prevailing strong US-Malaysia government relationship and bilateral trade ties,” he told Scoop.
On how Putrajaya should handle the tariff threat if it were to be imposed, Yeah pointed to “a flurry of diplomatic activities and intense negotiations” between the two governments.
The economist emphasised that Malaysia would have to adopt pragmatic and flexible negotiation and policy stances given that the immediate economic costs and damage from a 100% US import tariff would far outweigh the benefits of a full ascension to BRICS membership.
“Should negotiations fail and a compromise is not reached, Malaysia will have to be prepared for an economic slowdown, much reduced exports, and potential shutdowns of production plants – especially semiconductors and electronic products.
“The government would have to roll out plans to assist the affected companies to find alternative markets and for retrenched workers to find employment,” he cautioned.
Meanwhile, Samirul suggested for Malaysia to engage in a smart play by deepening trade ties with BRICS nations while safeguarding its vital relationship with the US. He said that the country can reduce its dependency on the greenback, thus aligning itself with a world where bilateral trade in local currencies is gaining traction.
“At the same time, Malaysia should fortify its economy by investing in high-value industries like tech and green energy, which are more insulated from global trade spats,” he added.
Conversely, both Samirul and Yeah said that the country’s long practised neutrality in its foreign policy would help it better negotiate with the US, with the former pointing out that the neutrality would help Malaysia to build bridges with both the US and the BRICS nations “without getting caught in the crossfire”.
However, Samirul cautioned that neutrality is not a “force field” as it does not shield Malaysia from the indirect fallout of a potential trade war between a Trump-led US and BRICS.
As the global economy is deeply interconnected, the shockwaves from the trade war confrontations could disrupt supply chains, roil financial markets, and complicate trade dynamics for everyone, including Malaysia, he said.
“(Therefore), diplomacy will be key (where) Malaysia must lead into its partner country status with the US, emphasise the mutual benefits of strong ties, and stay out of the line of fire in any potential tariff war.
“Meanwhile, engaging actively in Asean and other multilateral platforms can help Malaysia protect its trade interests while maintaining a neutral but proactive stance,” Samurai added.
Is Trump’s tariff threat serious?
Despite the eyebrow-raising threat imposed by the president-elect, economists have dismissed it as mere rhetoric, as well as questioning the authenticity and practicality of his threat.
According to Yeah, excluding Trump’s advisers, most economists do not think that his tariff and other economic policies are workable. In reality, the tariff war mounted by Trump against China during his first term, rather than leading to a reduction in imports from China, had the opposite effect.
“Despite the high tariffs being maintained under the Biden administration, Chinese exports to the US continued to rise,” he added.
Yeah also pointed out that American tech giants and multinational companies in Malaysia would see their supply chains and exports to the US adversely affected by any tariff hikes imposed, leading to higher costs which will be ultimately borne by US consumers.
Meanwhile, Williams speculates that Trump is not making a threat in the first place as he was just “stating his negotiation position from a position of strength”. He also said that the Republican is actually open to international trade due to his businessman background – where he wants more trade and investment but wants a better balance for the US.
“Tariffs are doable but he really does not want these, as he wants open trade for everyone. (Even) if he imposes tariffs, Malaysia will benefit because trade and investment will shift here,” he added.
Williams also called out Trump for misinterpreting BRICS’ goals in the first place as it has never aimed to create a new currency but is merely a bloc focusing on trade and investment on mutually beneficial terms, and not a political or an economic bloc.
“The dollar has only been dominant since the 1970s – just over 50 years. And this is mainly due to the use of the dollar in major commodities such as oil and gas, payment in dollars by international organisations like the International Monetary Fund and World Bank, and the use of dollars as a reserve currency.
“If alternatives arise from the market, there is nothing the US can do. But for now, there are no credible alternatives, however this is slowly changing as trade is increasingly settled in bilateral currency.
“(Plus), official foreign exchange reserves in dollars have fallen from 70% around 1999 to less than 60% now,” he said.
Conversely, Samirul viewed the tariff threat as more of a “headline-grabbing bluff” than a practical policy, since the tariff would pose a legal minefield under World Trade Organisation’s rules and ignite a tit-for-tat retaliation that could spiral into a full-blown trade war.
He also said that businesses dependent on imports from BRICS countries would see their profits decline, thus forcing them to conduct layoffs and cut down on investments.
Samirul also pointed out that the BRICS nations would not sit idle as Trump imposed tariffs on their goods as they would retaliate by slapping tariffs on US exports – from agricultural products like soybean to tech gadgets.
“Worse, such a move would accelerate the very thing Trump fears most: the erosion of the US dollar’s dominance. By alienating trading partners, he would push them further into exploring alternatives to the dollar, undermining its global role.” – December 7, 2024
