Tariff Talks Progressing Malaysia Reluctant On Some Areas Report

---

Despite ongoing negotiations to reduce tariff pressures from the US, Putrajaya is reluctant to meet certain demands made by Washington.
According to a Bloomberg report today, the Malaysian government is hesitant to meet the US government’s demand for an extension of tax breaks on American electric vehicles (EV), a reduction of foreign shareholding limits in the power and financial sectors, and a cut in subsidies for local fisherfolk, who are a major vote bank as they are predominantly Malays.
On July 8, US President Donald Trump announced a higher tariff of 25 percent on any and all Malaysian products sent into the country, separate from all sectoral tariffs, effective Aug 1.
This is one percentage point higher compared to what had been announced in April.
ADSIn a letter sent to Prime Minister Anwar Ibrahim and the Yang di-Pertuan Agong, Trump said: “The 25 percent number is far less than what is needed to eliminate the trade deficit disparity we have with your country.”
However, the letter also stated that there would be no tariff if Malaysia, or Malaysian companies, decide to build or manufacture products within the US and that Washington “will do everything possible to get approvals quickly, professionally, and routinely - in other words, in a matter of weeks”.
A day later, Investment, Trade, and Industry Minister Tengku Zafrul Abdul Aziz admitted that tariff negotiations with the US are complex and require certain sacrifices.
“However, our goal remains clear - to ensure market access for our exports, modernise our economy, and protect Malaysians’ livelihoods in the long term," said Zafrul (above), who led Malaysia’s tariff negotiations with the US.
He also assured that several “red lines” will not be compromised in negotiations, such as matters involving national interests and sovereignty.
EV tax policy, chip exports, fishing subsidies
According to Bloomberg, Malaysian officials are hesitant to prolong the tax exemption for US-made EVs, as that means they would need to give similar tax breaks to other nations.
The policy, which exempts imported EVs from import and excise duties, is also scheduled to end in December.
It is unclear why the US, which is soon ending its own EV tax credit, is seeking favourable access to the Malaysian market despite having a small presence here. In the first half of the year, Chinese companies, including BYD, accounted for nearly half of all new EV registrations.
Chinese automotive company BYDAs for adjusting Malaysia’s foreign ownership rules, Zafrul mentioned that it may not be fair, stressing Putrajaya would need to consult stakeholders before making a decision.
Additionally, negotiators see US demands for Malaysia to slash subsidies for the local fishing industry and reduce overfishing as interfering in domestic policies. The majority of fisherfolk in the country are Malays, a key vote bank for any parties aspiring to attain federal power.
Despite the issues mentioned, according to Bloomberg, Malaysia made progress addressing US concerns over the smuggling of high-performance semiconductors.
ADSIt mentioned that Malaysia came under increasing pressure from the US over what the latter describes as the flow of advanced AI chips to China through the nation.
The US banned sales of advanced chips to China in 2022, though last week, the Trump administration allowed Nvidia to resume shipments of its H20 chips.
While Malaysia said it had not uncovered evidence of transshipping, it has tightened requirements.
Individuals and companies now need permits to export high-performance American AI chips and must also inform the Investment, Trade, and Industry Ministry if they are aware or have reasonable grounds to suspect the items will be misused or used for restricted activities. - Mkini

---