STRENGTHENING TRADE TIES
Trump’s second term could lead to tariffs on Malaysian goods or that of Malaysia’s key trading partners. The best way to mitigate tariff risk is by ensuring exports are “truly Malaysian”. For goods with cross-border supply chains, it is important that a significant part of the production is done within Malaysia so that the US cannot accuse companies of using Malaysia as a conduit to escape tariffs.
Another way is for Malaysia to import more goods from the US to balance the trade surplus, and to position itself as an enabler of US productivity growth rather than a competitor. This can be done by enhancing the value of products using US imports and technology. This helps Malaysia ascend the value chain and accelerate US innovation.
Malaysia continues to explore trade agreements and multilateral cooperation to diversify its markets and import sources. A free trade agreement between Malaysia and South Korea is expected to be finalised in 2025, while the negotiation of a free-trade agreement with the European Union is still ongoing.
Malaysia also officially became a new partner country of BRICS along with Indonesia (which is now a full member) and Thailand. Taken together, these will enhance the country’s trade resilience.
As ASEAN chair of 2025, Malaysia will undertake high-level trade negotiations on behalf of the regional bloc.
Negotiations to enhance the free trade agreement between ASEAN and China are expected to conclude in 2025, and will cover upgrades in the digital and green economies.
Though this will strengthen China’s importance as an economic partner to ASEAN, the US is still the region’s largest investor. It is thus equally important to maintain warm ties with the world’s largest economy.
Meanwhile further engagements are planned with ASEAN+ partners including Japan, South Korea, India, Australia and New Zealand.
Amid heightened trade frictions and geopolitical tensions, Malaysia needs to attract diverse investments and strengthen trade links with a wider range of partners. Its chairmanship of ASEAN is also an opportunity to showcase the benefits of regional integration.
Julia Goh is Senior Economist (Malaysia) at UOB.
Source: CNA
