Nothing is certain under President Trump – inconsistent, fixed but flexible on tariffs. And it has a longer-term economic cost and consequences. Minutes after Trump unveiled a climbdown on tariffs, his press secretary scolded reporters at the White House for not understanding the “Art of the Deal”. The 90-day pause of tariffs on countries except China conjured up a different fable.
Trump and his officials have long put forward a
consistent, but contradictory, case for high tariffs. They want manufacturers
to set up plants in the US while the US tax the world. They don’t understand a
service sector economy like the US having surplus with many nations including
Malaysia. The US economy is driven by services which forms 80% of its GDP.
Stock markets have tanked. US government bond markets
endured a sharp sell-off. But he imposed the 10% tariff anyway, insisting that
he would not be moved.
Source: https://en.wikipedia.org
Nothing is certain under this President. From longstanding
geopolitical relationships to constitutional term
limits, he has little time for established norms. Erratic policymaking is a
feature, not a bug, of his administration. Trump has forged this uncertainty
and uses it as a short-term political tool.
The US could sign a trade agreement and you have fair
confidence that it meant that there’d be free trade, according to Joseph
Stiglitz, a Nobel prize-winning economist and professor at Columbia University.
With Trump, there is no longer that confidence. He has added a permanent level
of uncertainty into all cross-border transactions and there is no sanctity of
contracts.
Facing the threat of higher prices because of tariffs,
some consumers have curbed their spending. Others make higher purchases now,
earlier than planned, for fear of paying more next week, or month later.
How many global executives are prepared to commission a
new factory and years of construction, in a market where the economic landscape
shifts drastically from one week to the next? For now, at least, one thing
firms can count on is spiralling tensions between the world’s two largest
economies. After a dramatic escalation, the US is now charging a tariff of 145%
on Chinese exports, and China is charging a tariff of 125% on US exports.
Amid this, what must Malaysia do?
Well, the following:
(i)
Set-up
a lab for private-public sector engagement on ideas to pursue.
(ii)
Focus
on services surplus that the US has with Malaysia and let them know of this.
(iii)
Report/research
on the extraordinary profits that US MNCs have made because we give them tax
breaks of 10 years or more. This is the revenue foregone by Malaysians and is a
subsidy to the US.
(iv)
Malaysia
needs to form a Tariff Stabilisation Fund that will assist SMEs.
(v)
Appoint
Jeffrey Sachs (or someone similar) to help negotiate a new trade/tariff
arrangement; and
(vi)
Develop
a revitalisation/renewal fund with China to upgrade existing factories or help move
China’s “night” factories to Malaysia
I think we start with the above and
perhaps the effects will be less daunting for us. Even then, growth will drop
from about 5% in 2025 to 4% (or less) with the tariffs!
Reference:
Dealmaking genius or boy who cried wolf? Trump’s trade
retreat sows doubts, Callum Jones, The Guardian, 12 April 2025
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