LETTER | Malaysia's exports, which are largely dominated by Electrical and Electronics products, are potentially facing an uncertain outlook following persistent and assertive trade measures imposed by the US against others.

As record, the sector contributed approximately 40 percent to the country’s overall exports and 7.4 percent to national gross domestic product (GDP).

Furthermore, as the sixth-largest semiconductor exporter globally, the country holds a 7 percent global market share in this space.

Notably, Malaysia also packages 23 percent of all American chips, reflecting its strong ties with US firms.

Nevertheless, the protectionism measures being taken by US President Donald Trump’s administration could risk disruption of global supply chain.

Initially, he announced hike tariffs against Canada, Mexico and China, followed by latest plans to impose formal tariffs on steel and aluminum imports, alongside reciprocal tariffs on countries that levy duties on US goods.

Indeed, this so-called protectionism measure is not new in US history.

If we look back in history, between the start of World War I and the end of World War II, the volume of global trade fell and the world “de-globalised”.

To protect American farmers and businesses, the US government passed the Smoot-Hawley Tariff Act, which imposed its highest ever tariffs, raising them by about 20 percent on foreign agricultural imports and thousands of other imported goods.

Therefore, it is no surprise for the US to undertake such action as it will do anything, including carrying out unilateral action to remain strong economically and politically to control the world and become a pre-eminent superpower nation.

China target

Worse still, the plan was crafted merely to undermine China, which became one of the world's fastest-growing economies, especially after its admission to the World Trade Organization (WTO).

As a comparison, in 2001, when China first joined the WTO, the US GDP was US$10.6 trillion, while that of China was only US$1.3 trillion.

In short, the US economy was eight times larger than the Chinese economy. By 2022, the US GDP of US$25.5 trillion was only 1.4 times larger than the Chinese GDP of US$17.9 trillion.

Nevertheless, it is believed that the situation is not entirely grim, as there are opportunities to be seized. Despite these challenges, Malaysian exporters have viable alternatives to mitigate the impact.

Look to other markets

Europe and Asian markets such as Germany, Taiwan, Japan and Korea, where rapid technology growth and evolution, especially in producing AI chips are driving strong demand for semiconductor products, offer promising opportunities.

More importantly, the 17 trade agreements that Malaysia has ratified, such as the Asean Free Trade Area and the Regional Comprehensive Economic Partnership, provide Malaysian exporters with smoother access to these alternative markets.

On top of that, the recent decision made by Prime Minister Anwar Ibrahim to resume negotiations with European Union on the Malaysia-EU Free Trade Agreement during his visit to Brussels could potentially benefit our exporters to diversify their customer base, reducing dependence on the US market and insulating themselves from future geopolitical trade disruptions.

Leverage Asean

Last but not least, Malaysia could also leverage Asean in conjunction with it chairing the bloc this year to make this trade bloc persistently stronger together to face headwinds.

As the fifth-largest economy with a combined population of over 670 million, it is timely for Asean to take collective responsibility and decision, bringing one voice to safeguard each other to face potential tariff imposed by the US to its members.

Throughout this measure, Asean would become more resilient to withstand and counter the bleak global economy and uncertainty caused by geopolitical tension and trade wars worldwide.

The writer is a senior manager at InvestPerak and an adjunct Lecturer at Universiti Technologi Petronas.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.