January 13, 2025
PETALING JAYA – With Donald Trump set to return to the White House in a week, all eyes will be on the United States-China trade war but experts are calling for stability within Asean amid geopolitical and economic conflicts between these global powers.
Prof Dr Wong Chin Yoong from UTAR’s Business and Finance Faculty said Malaysia must remain neutral and adhere to trade regulations to safeguard its economy with the anticipated trade tensions.
He highlighted the need for Prime Minister Datuk Seri Anwar Ibrahim to maintain stability within the regional grouping.
“As the Asean chair in 2025, Malaysia must play a pivotal role in keeping the region strong and united. Acting as a bloc gives us more leverage when dealing with major powers like the US and China,” he said.
Prof Wong pointed out that Asean’s relationship with the United States is built on shared interests rather than shared values such as democracy.
“This pragmatic approach benefits us. It allows Asean to focus on mutual economic interests instead of political ideals,” he said.
“We are at a crossroads of global trade, supported by strong infrastructure, a skilled workforce, and robust supply chains. These factors make Malaysia attractive to investors from both the US and China,” he added.
Prof Wong also noted that companies relocating production to countries like Malaysia to avoid tariffs is a common and often beneficial practice.
“When businesses move to reduce costs or take advantage of a better business environment, it creates jobs and introduces new technology. This is a legitimate form of investment.”
However, he cautioned against unethical practices such as “origin washing”, where products are relabelled to bypass tariffs.
“If goods are imported into Malaysia, relabelled, and then exported to the US, it violates trade rules. At least 20% of the product’s value must be added within Malaysia for it to qualify as a Malaysian export,” he said.
Origin washing is the practice of falsely labelling goods as originating from a different country to avoid tariffs or trade restrictions.
Wong also said that the US frequently uses tariffs as a political tool, referencing past actions against countries like Canada, Mexico and Denmark.
He, however, believes that Malaysia is unlikely to become a direct target in the immediate term.
“We don’t hold anything strategically or geopolitically significant that the US might target with tariffs. However, as a country with a trade surplus, we could still feel the effects of broader tariff measures,” he said.
Sunway University’s Prof Yeah Kim Leng dismissed concerns about Chinese companies using Malaysia to bypass US tariffs, explaining that Chinese investment has grown since the Belt and Road Initiative’s launch in 2013.
He highlighted the role of regional trade agreements like the China-Asean Free Trade Agreement and the Regional Comprehensive Economic Partnership in enhancing trade integrity through rules of origin.
With possible policy changes under a second Trump term, Malaysian firms may face challenges, especially those collaborating with Chinese partners in the solar sector.
“Even with increased tariffs on Chinese imports, Asean products may still be competitive due to lower costs. Nevertheless, firms in Malaysia that collaborate with Chinese solar companies have to be prepared to face higher US tariffs, by exploring other markets,” said Prof Yeah.
Malaysia is notably a major player in the semiconductor industry, accounting for 13% of global testing and packaging. The country is seen as well-positioned to capture more business as Chinese chip firms diversify overseas for assembly needs.
However, Washington has already imposed tariffs on solar exports from Vietnam, Thailand, Malaysia and Cambodia – home to factories owned by Chinese firms. These tariffs were expanded in October following complaints from US manufacturers.
Reuters recently reported that the US is expected to tighten export restrictions further on Chinese semiconductor toolmakers and sales of certain chipmaking equipment, including those manufactured in Malaysia, Singapore and Taiwan.
Additionally, Trump has threatened to impose an additional 10% tariff on all Chinese imports upon taking office on Jan 20.
Assistant Professor Lee Pei May from the International Islamic University Malaysia said if Trump follows through on his campaign promises to impose universal tariffs on all imported goods, Malaysian businesses exporting to the US would face levies regardless of their ties to China.
“While Malaysia’s neutral stance has attracted investments, it can also be exploited by certain parties. The government must monitor incoming investments carefully and avoid aligning too closely with any global power, either rhetorically or in practice,” she said.
Malaysia, she added, should continue engaging with both the US and China on all fronts, resolving tensions diplomatically to maintain its position.