Malaysia faces new US risk from BRICS ties

The Star

5 days ago

PETALING JAYA: Malaysia may have to grapple with fresh uncertainties amid a decision by the United States to impose an additional 10% default tariff on any country seen as aligning with 'the anti-American policies of BRICS.'
This development comes as the July 9 tariff deadline looms and follows the recent BRICS Summit in Brazil, which was also attended by Prime Minister Datuk Seri Anwar Ibrahim.
However, earlier comments by Anwar last month indicated that tariffs talks between Malaysia and the United States had proceeded smoothly.
This latest 10% tariff threat – aimed at countries perceived to be closely aligned with BRICS – contributed to weakness on Bursa Malaysia yesterday, with the FBM KLCI declining 12.65 points, or 0.82%, to 1,537.54 at the close, snapping nine consecutive days of gains.
The broader market was negative, with 754 losers, 260 gainers and 446 counters unchanged.
Socio-Economic Research Centre executive director Lee Heng Guie said the latest tariff threat by US President Donald Trump is a continuation of an evolving trade policy narrative.
'It looks like Malaysia has to live with this uncertainty for the time being.
'If so, the country will have to brace for a situation where, under the Trump administration and maybe even after that, US tariffs become the new norm and are here to stay,' Lee told StarBiz.
Companies may need to reconfigure supply chains to adapt to this new reality, as Malaysia's geopolitical neutrality will likely be further tested in the days ahead, he added.
BRICS refers to a forum for cooperation among a group of leading emerging economies.
Last year, the group expanded beyond its original five members – Brazil, Russia, India, China and South Africa – to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.
The bloc – aimed at elevating member nations' global influence and serving as a counterweight to the United States and Western Europe – now represents more than half of the world's population.
CGS International Securities head economist Ahmad Nazmi Idrus said the proposed 10% tariff is a negative development for Malaysia.
'Currently, we expect Malaysia to get a 10% tariff (status quo) and if the tariff gets higher than this, it will be negative for the economy.
'That being said, there needs to be a definition on what 'alliance with BRICS' actually means. We are partners and not a full member, but so is Vietnam,' Ahmad Nazmi said.
Sunway University's professor of economics Yeah Kim Leng noted that many countries have strong trade relationships with BRICS and are unlikely to be deterred by the 10% tariff threat, especially if the economic and trade benefits with the group outweigh the cost of a US market loss.
Meanwhile, SPI Asset Management managing partner Stephen Innes said Malaysia is seen to eventually be impacted by Trump's proposed 10% BRICS-aligned countries in due course.
'With deep trade integration and strategic exposure to China, Malaysia could easily be swept into the penalty net – as a collateral casualty in Washington's increasingly binary view of global alliances.
'Exporters in key sectors like electronics and midstream manufacturing face heightened uncertainty, especially if US buyers start rerouting orders preemptively.'
However, beyond trade, Innes said the bigger risk is reputational.
'Being lumped, even implicitly, into the BRICS orbit could chill foreign investor appetite just as Malaysia is trying to attract fresh capital. This is no longer about tariff math – it's about alignment optics.
'If neutrality starts looking like silent endorsement in Trump's framework, Malaysia may need to rethink how it positions itself in a world where sitting on the fence can still get you soaked,' he added.