January 27, 2025
PETALING JAYA – Acquisitions of Chinese companies intending to pull out or scale down operations in the country is one step that could be taken to minimise the possible economic fallout from US President Donald Trump’s tariffs, say experts.
Other measures include diversification of the supply chain while capitalising on Malaysia’s Asean chairmanship to promote the country as a gateway to tap the growing regional market, particularly for renewable energy and green technology.
Prof Dr Yeah Kim Leng, who is also part of the Finance Minister’s panel of special advisers, said both the private sector and government have a role to play to offset the impact of lower exports to the United States due to the tariffs.
“One way is seeing Malaysian-owned companies carrying out mergers or acquisitions (M&A) of foreign companies such as those from China which are affected by the tariffs.
“If there is a willing buyer and willing seller and the Malaysian company has the capacity to take over the other company, they can do so.
“But it is important to ensure that the acquisition will not be subjected to the tariffs,” he said when contacted yesterday.
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Besides this drastic measure, Prof Yeah said local companies should also look at other markets for exports in anticipation that the US market would be shut off by the tariffs.
“The key here is for the companies to seek new and non-conventional markets such as from the Global South countries.
“From the government’s side, it should ink trade agreements to allow these companies to export their products to these countries to minimise the sharp decline in exports to the US if it happens,” he said.
Prof Yeah, a senior fellow and director of the Economic Studies Programme at the Jeffrey Cheah Institute on South-East Asia at Sunway University, said the government could also look at providing indirect incentives aimed at diversifying the supply chain, particularly those involving locally owned small and medium enterprises.
“Perhaps, some form of indirect incentives can be given to support these companies for certain procurements.
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“This is already happening as part of the push towards renewable energy such as solar power which Malaysia is pushing for,” he added.
As Asean Chair, Prof Yeah said Malaysia could attract investors for easier access to the regional markets by leveraging the Asean free trade agreements.
He said if the impact of the tariffs on local companies were severe, government intervention would be needed such as what was done during the Covid-19 pandemic.
“The government can look at providing support like how it was done during the pandemic.
“This could be financial aid such as a loan or through policies involving procurement,” he said.
Prof Yeah said such a move would help affected companies and also provide better job security.
Recently, it was reported that several Chinese-owned solar panel manufacturers are scaling back or halting operations due to a dip in profits following US tariffs last year with further tariffs expected.
In December last year, the Biden administration announced a 25% rate hike in solar wafers and polysilicon and a 50% increase in duties for tungsten products, which took effect on Jan 1 this year.
Last Thursday, Trump reiterated his recent threat of imposing tariffs on the European Union including a 10% punitive duty on Chinese imports.
Malaysia is a major hub for solar panel manufacturing in the region with exports totalling about RM7.88bil for the first nine months of last year with a large quantity manufactured by Chinese-owned companies for export to the US.
Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer Datuk Koong Lin Loong said apart from mergers and acquisitions by private companies, Malaysia must also look at strategic alliances with other global players instead of solely relying on investment of China involving manufacturing products such as solar panels.
“We should not lose our position as one of the biggest exporters of solar panels in the world.
“The government must do something to assist and not just leave it to the private companies,” he said.
Among the steps, he said, was to adopt a ‘backward integration’ of the supply chain where raw materials do not come entirely from a single country such as China.
“This includes the transfer of technology from the Chinese manufacturer to the local companies.
“One way of going around the tariffs is that local companies become manufacturers themselves,” he said.
Koong also said Malaysia must look for alternative markets for products such as solar panels which are affected by the tariffs.
“We need to look for an alternative market apart from the US.
“This includes the European Union, Asean and the Middle East which could help solve our immediate problem.
“They need to use solar panels for their green initiatives,” he added.
Unitar International University economics professor Anthony Dass said the government should expand the Feed-In-Tariff and Net Energy Metering to create local demand for solar panels as a means to cushion the impact of a drop in export to the US due to the tariffs.
“We could also negotiate trade agreements and exemptions with the US in light of Malaysia’s contribution to the renewable energy value chain,” he said.
Malaysia Chinese Business Council director Datuk Beh Hang Kong said local manufacturers could still bring a case with the World Trade Organisation with the assistance of the Investment, Trade and Industry Ministry.
He said the action would be against anti-dumping duties as long as local manufacturers could justify that raw materials used for production were sourced locally.
He echoed similar sentiments of shifting focus to other markets instead of relying on the US.