Brace For Impact Guan Eng Proposes Six Shields Against Trump S Tariffs

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US President Donald Trump’s “destructive” tariff policies pose the greatest threat to containing inflation and generating sustainable economic growth for Malaysia, said former finance minister Lim Guan Eng.
The DAP chairperson emphasised that reducing business costs is necessary as a tariff shield against inflation and to preserve the country’s gains in building a sustainable growing economy.
Lim (above, left) urged the government to adopt six financial and tax adjustments to reduce business costs, especially for small and medium enterprises (SME).
These were:
1. Raising the chargeable income threshold for the 15 percent tax rate from RM150,000 to RM300,000 and increasing the subsequent chargeable income threshold for the 17 percent tax rate from RM600,000 to RM700,000, thus allowing SMEs to enjoy annual tax savings of RM10,000.
2. Increasing the threshold of e-invoicing to be implemented in July from a yearly revenue of RM150,000 to RM500,000, to exempt small businesses.
3. Requiring only foreign workers to make Employees Provident Fund contributions and exempting employers from doing so.
4. Two percent tax on dividend income exceeding RM100,000 should be limited to publicly listed companies and not private companies.
5. Defer the imposition of a luxury tax to encourage tourism.
6. Defer the withdrawal of RON95 fuel subsidies and not float RON95 to market price, which will only cause inflation and rising transport costs.
Lim said Malaysia should stand with Canada, Mexico, and China against Trump’s tariff policies.
He cautioned that a global trade war with retaliatory tariffs may have the same adverse impact on escalating inflation and arresting economic growth as the Covid-19 pandemic.
Supply chain will be affected
The Bagan MP said that although the 25 percent tariffs on Canada and Mexico, as well as an additional 10 percent on existing tariffs already imposed on China, do not directly involve Malaysia, there would still be an indirect impact.
“China is by far Malaysia’s largest trading partner for the last 15 years and any negative impact on China’s economy would also adversely affect Malaysia.”
Lim noted that China supplies materials and components needed in the most efficient and cost-effective manner for Malaysia’s electronic hub.
He said that increasing the cost would definitely disrupt the supply chain and might result in shortages.
“Further, for an important electronics hub like Malaysia, the supply chains reach as far as Mexico and Canada due to its proximity to the United States, and as the final destination of most of our exports,” he added.
Asian shares fall
In a related development, BBC reported that Asian shares fell on Monday morning as investors prepared for a possible trade war that could impact the profits of major corporations and slow global growth.
Hong Kong’s Hang Seng Index was down 1.3 percent, Japan’s Nikkei 225 was 2.4 percent lower, South Korea’s Kospi tumbled three percent and Australia’s ASX 200 was 1.8 percent lower.
Markets in mainland China remained closed for the Chinese New Year holiday.
“The prospect of having a long and protracted trade spat between the world’s two biggest economies is causing investors to take risk off the table today,” Tim Waterer, chief market analyst at financial services firm KCM Trade, told BBC.
“The other worry for investors is which countries may be on Trump’s tariff hit list next,” he added.
Reuters quoted Paul Ashworth of Capital Economics as stating that Trump’s move was the first strike in what could usher in a destructive global trade war and drive a surge in US inflation that would “come even faster and be larger than we initially expected”. - Mkini

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