Malaysia Should Do Nothing Over Trump S Tariffs

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Donald Trump has imposed huge tariffs on the rest of the world - ranging from 10 percent for ally UK to 49 percent for beleaguered poor Cambodia.
But one thing that is under-reported and under-discussed is who pays for these additional tariffs.
The answer is of course the US consumer who will bear the brunt of, for instance, the 25 percent across-the-board tariff on imported cars, which will severely curtail US car buyer’s choice of cars. The wide-ranging tariffs are effectively taxes on Americans.
This is why Malaysia should not reciprocate Trump’s tariffs of 24 percent imposed on Malaysia. We don’t need to make things more difficult for our consumers and for the nation. Why tax our own people just because Trump wants to do that for Americans?
Leave things alone
The smart thing to do is to leave things well alone and deal with other things such as a possible contraction of exports to the US, if any, because of the tariffs which may reduce demand for products worldwide in the US market, including goods from our markets.
Malaysia should move towards a system of reducing and eventually eliminating all import taxes so that we can source the cheapest and the best products from anywhere in the world, a move which will help both consumers and producers of goods.
While consumers will benefit from a decrease in prices, producers will see a reduction in the price of inputs for their final products - which means lower prices domestically following increased competitiveness, and greater cost advantages in overseas markets.
One of the things that made America great previously, was their openness to goods, capital, people, expertise and others from all around the world. That explains why many consumer goods in the US are much cheaper than those here for instance.
Trump’s tariff and other moves will undo all that and if some other government after Trump does not quickly undo what Trump has undone, the US will go down the long slippery path to a very diminished status.
Lowest income group hardest hit
Some think tanks estimate that household expenses in the US as a result of the imposition of tariffs are as much as an additional US$4,000 (RM17,716) per year, with the lowest income group being hit the hardest.
Sure, the trade deficit may decrease, and there is extra revenue from the tariffs but it comes from the people.
Trump is taxing everyone but incredibly leaving the rich alone, including many of his cronies who sit in high echelons of decision-making.
In fact some economists predict inflation in the US preceding a recession from the Trump tariffs.
The pundits say that the Great Depression was depressed all the more due to tariffs. Most great brains, those not associated with Trump, feel that the expansion of trade and reduction of trade barriers is good for the world.
US President Donald TrumpIt’s not difficult to see why - if you are keyed into the world economy, you can access its knowledge, its best products and services at the lowest cost, get the best people and the best capital. That’s what the US has been doing to its great advantage all these years.
Just because some misguided president thinks that he knows best and is abandoning all the benefits of international trade to the US economy, there is absolutely no reason why we should be doing the same.
Extent of impact
Now, how badly will Malaysia be affected by the Trump tariffs? In 2024, Malaysia’s exports to the US were estimated at US$43.4 billion (RM192 billion), of which over half was electronics and electrical equipment at US$23.7 billion (RM104.9 billion).
Machinery accounted for US$6.3 billion (RM27.9 billion) followed by optical, photo and medical equipment at US$3.89 billion (RM17.2 billion), rubbers mainly gloves at US$1.69 billion (RM7.9 billion), furniture and related US$1.55 billion (RM6.9 billion), and vegetable and animal oils at US$600 million (RM2.6 billion).
These top six products accounted for US$37.7 billion or 87 percent of exports (RM167 billion).
The top export of electric and electronic goods are most likely semiconductors, chips and related products where Malaysia is a manufacturing centre and these are supplied to international companies, many of which have plants here. These exports are likely to be little affected.
Likewise for the others. Unless there are competitive products in the US and companies producing them have a lower tariff than the 24 percent assigned to Malaysia, demand for Malaysian products is hardly likely to be affected by tariffs immediately - readjustment to market changes will take years.
Even palm oil, which is not a very major export to the US, may not be significantly affected because the US is a net importer of vegetable oil and therefore all vegetable oil producers will be similarly affected by the tariffs.
Let’s not react. Let’s keep our economy open and look to open up even more. Our neighbour across the causeway does not impose duties on most imports, with cars and alcohol being noted as exceptions due to social reasons. But it imposes a value-added tax on imports.
We can eliminate import tariffs but charge a broad value-added tax instead, yes the Goods and Services Tax (GST), which this Madani government is loath to impose but which will solve many of our problems in terms of better revenue and widening the tax base. - Mkini
P GUNASEGARAM says politics is the source of bad economic policies.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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