Trump Tariffs Keep Calm And Cut Trade Barriers

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Donald Trump’s long awaited tariff hikes have provoked the expected shock and condemnation of most of the world with belligerents threatening tit-for-tat tariffs to hit back.
In this predicable political maelstrom wiser heads must prevail to avoid a global trade war that no one will win.
The tariff levels are worse than expected for many Asian countries especially those with close links to China but for others with fewer restrictions, such as Singapore, the base tariff has been applied and can be reduced through negotiation.
Elsewhere, outside of Asia, the EU will face 20% reciprocal tariffs along with 25% tariffs on its cars whereas the UK may finally see some real benefit from Brexit with only the baseline 10% tariff applied to British goods which it is now free to negotiate away since it is no longer bound by EU protectionist restrictions.
So the tariffs are a negotiating position and may be shortlived if people behave calmly and reasonably by cutting rather than raising trade restrictions in response.
The position taken by President Trump is that the US faces unfair access restrictions for its exports into many markets. These can be tariffs or other restrictions such as permits, regulations or product standards which are non-tariff barriers to US exports.
The new tariff schedule simply aims to address this issue by imposing higher tariffs on countries with restricted access to US exports and lower tariffs for countries with fewer restrictions on US exports. What could be more reasonable?
In Malaysia, most tariffs on US products are actually quite low but there are other restrictions such as approved permits for automobiles or even higher halal standards for many products compared with other Muslim countries.
The 2025 US National Trade Estimate Report for Malaysia noted that “unfair” trade regulations, such as a 251% maximum tariff on dairy products, are a major barrier to US businesses.
So the counter measures are to cut these restrictions and negotiate more open access to Malaysian markets for US exports. Raising tariffs would be disastrous.
If the 24% reciprocal tariff can be negotiated down through positive reciprocal removal of restrictions, then the negative impact can be minimised.
Otherwise, the impact could be big because the US is Malaysia’s second largest single export market with nearly half of the exports being high-value electrical and electronics, including the strategically important semiconductor sector.
Lower trade with the US would therefore worsen net trade which has been trending down since mid-2023. This will drag down GDP and would require a revision of the economic growth forecast.
The impact on other Malaysian export markets and global trade as a whole could also be very negative if there is a tit-for-tat increase in their tariffs, especially by the EU. This belligerence is the real risk, not the tariffs themselves.
This context helps us to understand the real underlying strategy behind the new tariffs. Contrary to what some economists have argued, this is not to raise the income of the US government nor is it to build a protective wall behind which America can retool. Both of these are long-term policies which a second-term president has no advantage from.
The aim is much more short-term, to disrupt global tariff and trade restrictions and shock as many countries as possible into the reality that tariffs and trade barriers must be cut across the board.
Viewed in this context, Trump’s strategy not only makes sense, it is a much-needed breath of fresh air for international trade relations biased in favour of the EU, China and low-cost manufacturers around the world. Malaysia should negotiate calmly and not take sides. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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