Not waiting for the previous round to cool down, the United States has again escalated its tariff policy. On 12 April 2025, China announced a 125% retaliatory tariff on U.S. goods, following earlier U.S. measures that raised total tariffs on Chinese imports to 145%—a combination of a 10% base rate, a new 125% “reciprocal” tariff, and an earlier 10% fentanyl-linked tariff. Days prior, President Trump had also imposed a 10% blanket tariff on all other countries’ imports for 90 days. The situation escalated further when China suspended exports of key minerals essential for semiconductor manufacturing. These rapid-fire moves have once again thrown the global economy into uncertainty, unsettling markets and raising fears of a protracted trade war.
In a recent congressional hearing, U.S. Trade Representative Jamieson Greer faced fierce criticism after announcing a tariff pause mid-testimony.
The move was seen as erratic and emblematic of the unpredictability of the “America First” trade stance, sending ripples through global markets.
It is becoming increasingly clear that the U.S. is attempting to isolate China by pushing other countries to choose sides or negotiate directly with Washington—effectively placing global trade partners as pawns in a high-stakes power contest. But this aggressive strategy may ultimately backfire.
Malaysia’s Strategic Middle Ground
Malaysia is uniquely positioned. As a trade-dependent nation with significant volumes exchanged with both the United States and China, it must now chart a careful path forward.
Aligning too closely with either power risks alienating the other and undermining Malaysia’s commitment to multilateral trade.
However, by leveraging its central role in ASEAN, Malaysia can advocate for a collective Southeast Asian response—one that rejects binary alliances and instead defends a rules-based trading order.
What is at Risk?
Trump’s proposed 10% blanket tariff —reduced from a previously floated 24% reciprocal rate— poses a direct threat to export-driven economies like Malaysia. Key sectors such as electronics, machinery, and palm oil could face reduced demand or lose competitiveness in the U.S. market.
This is just the beginning of what could become a prolonged cycle of economic instability, especially as Trump continues to revise his trade policies while openly disregarding WTO agreements.
Retaliatory measures could destabilise commodity markets and deter foreign investment. Malaysian SMEs, which thrive on consistent trade flows and stable contracts, stand to lose the most in such a volatile environment.
Opportunities in Disruption
Yet disruption often breeds opportunity. If U.S. restrictions on Chinese imports tighten, Malaysia could step in to fill supply chain gaps—particularly in semiconductors, green energy components, and rubber-based medical products.
American companies looking to “friend-shore” or diversify away from China may increasingly turn to Malaysia, drawn by its skilled workforce, robust infrastructure, and open investment climate.
Moreover, ASEAN’s collective market of over 650 million people offers a valuable internal buffer. By strengthening intra-ASEAN trade and cooperation, Malaysia can help reduce the region’s vulnerability to external shocks.
ASEAN as a Stabilising Force
This moment calls for ASEAN unity. While Malaysia has chosen to engage directly with the United States to address tariff concerns—opting not to file a formal complaint with the World Trade Organization (WTO)—other nations like China and Canada have initiated dispute proceedings through WTO channels. The European Union has expressed strong opposition to the U.S. tariffs and is preparing countermeasures, though it has not yet filed a formal complaint with the WTO. Malaysia, as the 2025 ASEAN Chair, is coordinating closely with regional partners to formulate a collective response, emphasising the importance of ASEAN solidarity in navigating these trade challenges.
Malaysia can now step up to lead ASEAN in reaffirming the importance of the World Trade Organization and the principles of free and fair trade.
Rather than reacting to superpower pressures, ASEAN could establish its own mechanism to monitor and respond to external trade disruptions, while simultaneously deepening ties with other middle powers like the EU, Japan, and India.
This would reinforce Malaysia’s image as a pragmatic and principled nation—one that values sovereignty, stability, and diplomacy.
Rejecting Economic Hostage Diplomacy
What makes Trump’s trade policy so dangerous is not just its economic cost, but the precedent it sets. When major powers unilaterally rewrite trade rules, smaller countries risk becoming mere collateral in geopolitical games.
The international community must work to strengthen and reform the WTO, ensuring that global trade governance isn’t dictated by political whims or election cycles.
Will It Backfire on the U.S.?
There are already signs that Washington’s strategy may turn against itself. American businesses have voiced increasing frustration over policy instability. Rising prices and broken supply chains are contributing to a looming economic problem: stagflation.
This rare and dangerous mix of stagnation and inflation now hangs over the U.S. economy. Federal Reserve officials have warned that the new tariffs could push growth “materially below trend” while making inflation worse. JPMorgan Chase CEO Jamie Dimon has echoed these concerns, hinting at an impending recession.
As investor confidence wanes, the U.S. risks alienating global partners and isolating itself just as others—like those in ASEAN—seek closer collaboration.
A Moment to Lead
For Malaysia and ASEAN, this is a historic moment. Not one for aggression or grandstanding, but for quiet leadership, clarity, and cooperation. In a world torn between superpower tensions, those who remain steady and principled may ultimately hold the greatest power of all.
