Shameless Bowing To Trump Tariff Pressure

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Malaysia’s shameless succumbing to US President Donald Trump’s unwarranted pressure over tariffs involves more than lopsided trade conditions.
It is also a servile surrender of sovereign rights, and that comes with other restrictions too.
Although called a reciprocal arrangement, it is badly one-sided - a long list of Malaysian “shoulds” in return for what appears to be a unilateral imposition by the US of a 19 percent tariff without any relent.
In addition, Malaysia makes a slew of concessions, including an ironclad agreement to purchase hundreds of billions of ringgit of US goods through its multinational corporations.
The only obligation that the US seems to have is to reduce the duty on applicable goods to 19 percent from 24 percent in April, both of which were unilaterally imposed by the US, eschewing the aegis of any recognised international trade regulation body.
RM1 trillion concession to the US
US President Donald Trump revealing the ‘reciprocal tariffs’ at the White House in AprilAs I explained in a previous article titled “A ginormous RM1 trillion bill for a small tariff cut”, this agreement that has come to pass has given away over RM1 trillion in various concessions for just a five percentage point gain in tariffs.
If we assume 20 percent of exports, or some RM23.8 billion, are subject to tariffs, as there are many exemptions for goods such as semiconductors, that five percent difference amounts to just RM1.19 billion a year.
The RM1 trillion worth of concessions is 840 times that! Ridiculous.
It has totally ignored the principle that trade in goods has to be taken into account with the trade in services, where the US enjoys a huge surplus (see table).
If this were done, the deficit would be substantially reduced to RM16.7 billion from RM56.2 billion for 2023.
It shows what can go wrong when agreements are done in haste and without due consultation among other nations and affected parties, putting political appearances at the top of priorities, a characteristic of this Madani government.
Here’s a list of some of the concessions which was agreed upon as far back as August and are now finalised:
US$150 billion in purchases by multinational companies in Malaysia’s semiconductor, aerospace, and data centre sectors over five years
US$70 billion in Malaysian investments in the US over 10 years
US$19 billion Boeing aircraft purchase by the Malaysia Aviation Group (MAG) for fleet renewal
US$3.4 billion per year in liquefied natural gas (LNG) purchases by Petronas
US$42.6 million per year in coal purchases by Tenaga Nasional Bhd 
US$119 million in telecommunications product purchases by Telekom Malaysia
Servile surrender
That’s over US$240 billion or about RM1 trillion. It looks like our negotiators are terribly innumerate, giving away so much for so little.
Add to this the servile surrender of sovereign rights, where many things need to be referred to the US.
Here’s a sampling:
Article 3.1: Digital services tax
Malaysia shall not impose digital services taxes, or similar taxes, that discriminate against US companies in law or in fact.
Article 3.3: Digital trade agreements
Malaysia shall consult with the US before entering into a new digital trade agreement with another country that jeopardises essential US interests.
Article 5.2: Export controls, sanctions, investment security, and related matters
1. Malaysia shall, through its domestic regulatory process, cooperate with the US to regulate the trade in national security-sensitive technologies and goods through existing multilateral export control regimes, align with all unilateral export controls in force by the US, and ensure that its companies do not backfill or undermine these controls.
3. Malaysia shall, through its domestic regulatory process, cooperate with the US to regulate the trade in national security-sensitive technologies and goods through existing multilateral export control regimes, align with all unilateral export controls in force by the US, and ensure that its companies do not backfill or undermine these controls.
A tiny consolation
A tiny consolation is that either party may terminate the agreement under Article 7.5: Termination to take effect 180 days after the date of the notification, but commitments made contractually will likely not fall under these.
In the meantime, Schedule 1 gives the US more benefits. Article 1.2 says Malaysia’s sales and service tax (SST) shall exclude US exports of agricultural and seafood products.
It also provides for adopting US certification standards for a range of imports, including food imports. That’s yet another surrender of sovereign rights.
There are many more contentious issues. I have chosen to highlight the main ones which show that the Malaysian side has been totally remiss in getting any concessions from the US, in its overeagerness to appease Trump and make the agreement more appetising than it actually is.
A political pronouncement
Predictably, Putrajaya has not passed up the opportunity to make a political statement.
“Recognising the growing strategic and multifaceted cooperation between Malaysia and the US, the prime minister and President Trump announced the elevation of the bilateral relations to a comprehensive strategic partnership (CSP).
“The elevation of partnership marks a historic advancement in the relations between the two countries, built upon a foundation of diplomatic engagement forged since 1957 and formalised as a comprehensive partnership in 2014,” the Foreign Ministry said.
Does the CSP mean anything at all, given that the concessions we gave the US far exceed anything we got in return? The US not only imposed tariffs, but it also extracted RM1 trillion in concessions on top of that.
It may look like Trump is winning, but he is not in the long term.
Broadly, if everyone ends up subject to a similar tariff for exports to the US, there is no major change in competitive advantage. But the US consumer pays in terms of higher prices of goods.
If exporters to the US play smart, they will simply pass the cost of tariffs in full to the consumer and keep their margins. It’s unlikely the US can produce alternatives given its high cost of production.
It means higher prices of all imported goods to the US except imported semi-finished goods used in US industry for final production, which are specifically exempted with zero duties.
Poor moral fibre
As one economist who did not want to be quoted said, “My simple synopsis is that this tariff policy represents the largest ever wealth transfer from poor Americans to the rich. Time will tell if the poor Americans realise this and will change their vote accordingly.”
The tariffs are a way to raise revenue for the US government without taxing the rich, whom Trump is cultivating to stay in power and on whom he relies for his funding and his public relations effort - the dissemination of not only platitudes but plain lies designed to deceive across all media, especially social media.
The sad, unfortunate thing is we have wittingly and willingly allowed ourselves, along with many others, to be used in this battle for the public mind in the US and the world by Trump - that’s an indication of rather poor moral fibre.
Tell me, did we really need Trump to get a ceasefire going for the border skirmish between Cambodia and Thailand? And has he fully stopped genocide in Gaza and the West Bank?
But yes, some of us gave him credit and credence for his false claim that he is ending wars worldwide so that they will look better at home.
Pathetic! - Mkini
P GUNASEGARAM says appearances are deceiving most of the time.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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