Trump’s new tariffs and the resilience of the Madani economy
Datuk Seri Dr Mujahid Yusof Rawa
US President Donald Trump recently announced new tariffs imposed on 158 countries worldwide, including Malaysia, effective April 9.
These tariffs are a reciprocal response to international trade issues which Trump claims involved various barriers, obstacles and restrictions on US products.
They also reflect Trump’s radical move to restructure the US economy by focusing inward to protect its domestic interests.
Trump is attempting to fulfill his campaign promises by prioritizing American interests first.
He alleges that former Presidents Obama and Biden exposed the US economy to the exploitation, manipulation, and domination by China due to imbalances and disadvantageous terms against US exports.
In response, President Trump announced reciprocal tariffs, which analysts describe as a “new global trade war” under his administration.
The European Union (EU) has warned that any of its member states affected will see retaliatory action from the entire bloc.
China, which faces a new 34% tariff, has reacted with calm and steady approach.
Analysts expect China to focus on strengthening internal stimulus to support its domestic industries and aim for a 5% economic growth, while leveraging its rare earth resources as a trade advantage.
Malaysia is now subject to an increased tariff of 24%, up from 14%, in line with the average 10% increase imposed on the 158 countries. The impact on Malaysia could be significant, considering Malaysia-US trade was worth USD 80.2 billion in 2024, up from USD 65.55 billion in 2023.
Malaysia has a USD 25 billion trade surplus with the US, meaning Malaysia exports more to the US than it imports.
The US is Malaysia’s third-largest trading partner, amounting for 11.3% of the country’s total trade.
As a trading nation, Malaysia has responded diplomatically, opting for trade diplomacy and viewing international agreements as negotiation platforms to reach more balanced and comprehensive outcomes.
The Ministry of Investment, Trade and Industry (MITI) has highlighted the potential of the Trade and Investment Framework Agreement (TIFA) alongside the Free Trade Agreement (FTA) to ensure Malaysia maintains progressive and fair trade relations.
Diplomacy is Malaysia’s hallmark in handling global trade issues—balancing sovereignty while remaining competitively engaged.
Malaysia also recognizes the impact of the US-China trade war on its regional and domestic economic standing.
National leadership will play a critical role in addressing the impact of these new tariffs by sustaining and strengthening the country’s economic fundamentals—both micro and macro.
Malaysia’s long-standing advantage lies in its strong fundamentals, which provide resilience amidst drastic and uncertain shifts in global trade.
Domestically, this new challenge should unify all parties toward a national consensus on the need for a strong and stable economy.
Both opposition and government must offer constructive ideas to defend national economic sovereignty. Undermining this issue for political gain is akin to betrayal.
In terms of policy, the MADANI economy—under Prime Minister Dato’ Seri Anwar Ibrahim initiative and the Unity Government—has from the start focused on preparing for any form of uncertainties.
Its sustainability and people-centric approach has led to a transformative economy.
Amongst the key MADANI products is the New Industrial Master Plan (NIMP), which prioritizes national industrial sectors, strengthens supply chains, and expands ESG (Environmental, Social, Governance) as core business criteria.
These elements stem from the core principle of SUSTAINABILITY, which ensures stability and continued effectiveness under any condition. NIMP acts as a buffer against global tariff shocks and must be further strengthened.
Likewise, the National Energy Transition Roadmap (NETR) is steering Malaysia toward a low-carbon, clean, and green economy.
MADANI policies have laid the foundation for a new market economy.
Recently, Parliament passed a Carbon Capture Law, serving as a catalyst for the emerging global green economy.
Malaysia is also preparing to shift from fossil fuels to renewable energy through green economic incentives.
This shift opens up new partnership opportunities beyond traditional Western alliances, especially with emerging tech leaders like India and China.
From a fiscal management perspective, the MADANI economy has introduced solid legal standards through the Public Finance and Fiscal Responsibility Act, which caps national debt at 65% of GDP and limits debt servicing to 15% of national expenditure.
This boosts investor confidence in Malaysia’s fiscal stability and assures citizens of responsible and fair government spending. In 2024, Malaysia recorded RM378.5 billion in investments.
With a population of 30 million, low unemployment, and government support for SMEs—the core of its economy—Malaysia has strong resilience to face this new global challenge.
Since the post-COVID era, Malaysia has been preparing for such uncertainty.
The success of MADANI is reflected in stable growth and increased investment in 2024 at 5.1%.
Maintaining this economic growth will become more challenging with Trump’s new tariffs.
Both private and public sectors must remain vigilant and committed to achieving sustainable national growth.
Malaysia’s advantage in dealing with Trump’s new tariffs also stems from its leadership as ASEAN Chair, which in 2022 saw a regional agreement between ASEAN, Australia, New Zealand, Japan, China, and South Korea—forming the largest economic bloc under an FTA.
This renders ASEAN a competitive edge with China as its largest trading partner.
Additionally, Malaysia was accepted into BRICS partner earlier this year, alongside other global South nations, offering new markets and partnerships.
There’s no denying the new Trump tariffs will have an impact, especially reducing Malaysia’s trade earnings due to lost competitiveness in the US market.
The National Geoeconomic Command Centre, formed by the Cabinet, will assess the tariffs’ impact and develop mitigation plans for affected sectors like E&E, palm oil, and rubber.
Nevertheless, I am confident that Malaysia’s existing economic infrastructure and the strategic structure of the MADANI economy—designed to anticipate uncertainty—can withstand the impact calmly and even identify new opportunities from Trump’s retaliatory measures.
Datuk Seri Dr Mujahid Yusof Rawa is a Senator in Dewan Negara and AMANAH deputy president.
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