Why it's hard for Malaysia to win a trade deal with the US — Phar Kim Beng

Malay Mail

6 days ago

JULY 22 — Trade negotiations with the United States have never been easy. But under President Donald Trump's second term, they've become even more complicated — especially for countries similar to Malaysia.
The reason is simple: the US doesn't merely seek mutual benefit; it aims to dominate. And its primary tool is tariffs.
When the US imposes or threatens tariffs on exports — whether agricultural products, medical devices, automotive parts, or digital services — it forces countries into a reactive posture.
Although Malaysia's electronics and semiconductor exports are currently exempted from punitive tariffs, this should not be taken as a sign of safety or favour.
Exemptions can be reversed. The threat is part of a broader tactic to compel compliance across all sectors.
This form of pressure is especially difficult for economies analogous with Malaysia — those heavily reliant on trade, but without the strategic weight to push back effectively.
Trade talks are not one-dimensional. Malaysia must negotiate externally with Washington, while internally managing the political fallout among industry groups, lawmakers, and civil society. It's what scholars call a 'double-level game'.
No Malaysian government can accept every US demand without inviting domestic resistance.
Yet pushing back may invite retaliation. And the US, under Trump, has shown no hesitation to act unilaterally — even toward long-standing allies.
The Philippines, despite its security alignment with the US, is still facing 20% tariffs. If they are not spared, Malaysia should not expect preferential treatment.
The essence of the American trade posture is to leave very little room for sovereignty.
Washington increasingly challenges regulatory frameworks — in food safety, environmental protection, digital governance, and labour conditions — as disguised protectionism.
Countries akin to Malaysia are pushed toward a binary choice: either deregulate completely or allow American goods to enter tariff-free, regardless of local concerns.
This isn't negotiation. It's economic coercion under the cover of trade diplomacy.
An aerial view picture of the port of Santos, the largest port complex in Latin America and one of the largest in the world, taken on July 17, 2025, in Santos, Sao Paulo state, Brazil. — AFP pic
Malaysia cannot count on ASEAN's collective response this time. With the August 1 tariff deadline fast approaching, regional coordination is nearly impossible.
Even though electronics and semiconductors — the lifeblood of Malaysia's exports — are spared for now, the broader system is still under threat.
If the US shifts its focus to value-added manufacturing, digital services, or intellectual property rights enforcement, Malaysia could quickly become a new target.
Some may argue that zero-tariff deals from the US represent an opportunity. But even such arrangements come with strings attached.
They open Malaysia's markets while keeping US regulatory levers intact. It's akin to opening your doors wide and hoping the guest will do the same. But the guest holds all the keys.
This is why Malaysia faces a structural challenge. To resist is to risk retaliation.
To comply is to erode policy autonomy. And even in sectors currently shielded from tariffs, the climate of uncertainty deters investment and long-term planning.
Ultimately, the US does not just trade. It disciplines. Its trade strategy is consistent with its broader foreign policy logic — hierarchical, transactional, and unapologetically self-interested.
Countries parallel with Malaysia in scale and exposure are forced to adapt constantly or face exclusion.
There are no easy answers. But clarity is a start. Malaysia must accept that the US no longer views trade as mutual gain, but as leverage.
In response, Malaysia must invest in domestic resilience, seek supply chain diversification, deepen South-South linkages, and work toward a coalition of likeminded economies that still believe in rules-based trade.
Because when the rules are rewritten by one player, and the game is played with two sets of standards, the only real protection is strategic alignment — with partners who understand that fairness is not just about tariffs, but trust.
In approaching August 1 — the day when the US will impose a tax of 25 per cent on most major Malaysian items — the trade negotiators of Malaysia must understand that embedded into Trump's logic of tariff is also the pernicious American demand, invariably imposed on Malaysia, to keep buying American goods.
Only by buying, such as going beyond the 30 Boeing airliners that had been bought by the Malaysian Airline System (MAS) and AirAsia, can Malaysia work with the US towards a zero-tariff barrier.
* Phar Kim Beng is a professor of Asean Studies and director of the Institute of Internationalization and Asean Studies at the International Islamic University of Malaysia
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.