Where tariff rates in 8 countries were reduced and 4 remained the same, Malaysia was slapped with 1% increase.
Arriving in waves, letters from the Trump administration started reaching the desks of 14 countries on Tuesday (July 8) ahead of the July 9 deadline. However, the 90-day pause will get some breathing space as the new tariffs will begin only on August 1. Apparently, Trump renewed his threat of a 25% tax on products entering the country from allies Japan and South Korea.
Other countries being slapped with the same 25% tariff rate included Malaysia (up from an initial 24%), Tunisia (down from 28%) and Kazakhstan (down from 27%). Also hit with US tariffs include South Africa (30%), Bosnia and Herzegovina (30%), Indonesia (32%), Serbia (35%), Bangladesh (35%), Cambodia (36%), Thailand (36%) and 40% on both Laos and Myanmar.
Overall, 4 countries saw their tariff rate remain, 8 reduced, and 2 increased. Malaysia and Japan are the only two countries slapped with an increase, from 24% to 25%. Exactly how did Malaysia screw up spectacularly when even Cambodia managed to convince the White House to slash its tariff from 49% to 36%, not to mention Laos (from 48% to 40%) and Myanmar (from 44% to 40%)?
The fact that Zafrul Abdul Aziz, the Investment, Trade and Industry Minister entrusted to negotiate with the Trump administration, was “surprised” by the “unexpected” tariff hike speaks volumes about his incompetence. Previously, we already published that it’s a recipe for disaster if PM Anwar Ibrahim sends the useless Zafrul to Washington to negotiate (read here).
It was an absolute waste of taxpayers’ money flying the clueless minister on business class and staying at posh hotels in Washington for a fruitless negotiation because he did not even know the right strategy in negotiations. The best part is that Zafrul has been arrogantly expressing his confidence that the US would reduce its proposed tariffs from 24% to 10%, the baseline enjoyed only by Singapore.
In fact, Zafrul has claimed that the negotiation process was so smooth that there isn’t anything to worry about. Yet, today, after dozens of trips to Washington involving 25 negotiation sessions, the genius admits he doesn’t know what actually went wrong with his negotiations. One might wonder if Trump would leave the tariff at 24% rather than 25% had Malaysia sent a monkey to negotiate instead.
In Southeast Asia, when the US president first began his economic assault, Vietnam proactively offered to remove all tariffs on US imports after Donald Trump announced a 46% levy. Cambodia, hit with a 49% tariff, quickly announced a significant reduction, to just 5%, in import tariffs on U.S. products as early as two days after Trump’s tariff war announcement.
Thailand, hit with a 37% tariff, sent Deputy Prime Minister and Finance Minister Pichai Chunhavajira to the US for discussions with key stakeholders. Indonesia, which saw its currency, the Rupiah, tumbled to its lowest level against the US dollar since the 1997-1998 Asian financial crises, said it will not retaliate despite Trump’s 32% tariff, but would negotiate with Washington for a better deal instead.
As a result, dodging the severe levy of 46% that was threatened in April, Vietnam is being rewarded with a 20% tariff for exports into the US, while Cambodia celebrates a deep discount, from 49% to 36%. Thailand and Indonesia saw their previously threatened tariffs at least maintained at 36% and 32% respectively. Even pariah Myanmar’s tariff is cut to 40% from 44%.
However, Malaysia, having arrogantly played down the effect of the 24% tariff slapped on the country by the American president, is speechless at 25%. The hopeless Minister Zafrul had tried – and failed – to cheat and spin by claiming that the actual tariff rate Malaysia imposes on American exports was 5.6%, contrary to the US’s claim of 47%.
The US was not impressed with government procurement, where foreign companies are required by law to take on a local – Bumiputera (indigenous ethnic Malay) – qualified partner before tenders will be considered. Likewise, the Malaysian government has procurement preference for locally manufactured pharmaceutical products, which discourages the use of imported pharmaceutical products (a sector which Trump threatens with a 25% tariff).
Limiting foreign banks to eight physical branches, restrictions on foreign business of reinsurance, foreign ownership requirements through a 70-30 equity split between foreign investors (limited to 70% ownership) and ethnic Malaysians (must have 30% stake) are just some trade barriers which Trump deemed unfair practices that Malaysia must consider before negotiating with the US.
In 2024, the US was the third-largest trading partner of Malaysia, accounting for 11.3% of Malaysia’s total trade. America remains one of the major foreign investors in Malaysia. It also ranked second in terms of gross foreign direct investment (FDI) in 2024, as well as the fourth-largest investor in terms of FDI stock at the end of 2024. Crucially, Malaysia enjoyed a trade surplus of RM72.4 billion (2024).
With about 3 weeks before the tariff comes into force beginning August 1, the clueless Zafrul clumsily cooked up an excuse that there is still time to negotiate with the US over the new 25% tariff. But if he can’t persuade Trump officials in 90 days like other ASEAN negotiators, what makes him think he could convince the US to slash the tariff in 21 days?
Sure, Japan too suffers the same fate. But obviously, Trump was bullying his subservient ally as Japanese Prime Minister Shigeru Ishiba’s party faces upper house parliamentary elections on July 20 that could weaken his fragile ruling coalition or potentially cost him his job. Ishiba said he would strike an agreement that protects Japan’s national interests, but he warned of potential job losses.
South Korea, meanwhile, has just turned over its government in early June, with the left-leaning Lee Jae Myung emerging as the country’s new president. After an emergency cabinet meeting on Tuesday (July 8), his office said South Korea had “avoided the worst-case scenario” of getting slapped with a higher tariff, but it lamented some “regrettable” aspects of Trump’s letter.
Seoul and Tokyo share the same vulnerabilities that have put them in Trump’s crosshairs. They both have significant trade surpluses with the US and suffer from levies Trump has already imposed on autos, aluminium and steel. At the same time, South Korea and Japan have something to offer Washington – they are home to global companies that are willing to invest in the US and are ready to share their shipbuilding prowess and semiconductor expertise.
Instead of self-praise and chest-thumping that Malaysia’s 25% tariff isn’t that bad, as even both Japan and South Korea are penalised with the same rate, the critical question begging an answer is why Malaysia is the only ASEAN country punished with a higher rate than the original rate imposed. Either Zafrul has been sleeping on the job, or Trump sees a compelling reason to punish the country even more.
To make matters even worse, Trump threatens an additional 10% tariff on any country aligning itself with the “Anti-American policies” of BRICS, which coincides with Anwar’s strong support for not only intra-BRICS trade but also aggressively pushing ASEAN members to strengthen strategic cooperation with BRICS. Clearly, there’s something about Anwar’s leadership that offends the US.
It’s not rocket science that Prime Minister Anwar Ibrahim’s reckless pro-Hamas, pro-China, anti-Trump and anti-Semitic policies have annoyed the Trump administration. After almost 70 years of bullying minority ethnic Chinese and ethnic Indians, perhaps Zafrul and Anwar could not accept bullying by a bigger bully called Donald Trump, who gave them a taste of their own medicine.
Someone should lecture Zafrul that his royal cable and Malay Elite status do not work in the White House. Sending a boy to do a man’s job is a disaster. Likewise, Anwar, who is trying to copy Mahathir’s leadership, should be reminded that Malaysia is just a small fry in the big boys’ game. It’s insulting that PM Anwar – despite being the chair of ASEAN – is the only leader in the region whom Trump doesn’t want to speak with.
The solution is simple – offer to open up Malaysia’s market to the US like Vietnam, or slash all the hidden taxes (excise duty, import tax, sales tax or whatever the government likes to call) which the US considers as “unfair high tariffs” that restrict the export of American products into the country. Anwar should also stop instigating ASEAN countries to fight the US as a bloc because it won’t work.
The good news is that Trump could be bluffing in the poker game with all 14 countries. He might or might not change his mind. Still, unlike China, Malaysia holds very weak cards even while facing the TACO (Trump Always Chicken Out) President. For Anwar to fight tooth and nail, poaching a failed Zafrul from UMNO, while booting his own talented Rafizi Ramli is both puzzling and entertaining. – Finance Twitter