Malaysia Must Not Rely Solely On Tariff Adjustments To Be Competitive But Diversify Export Base – Economist

By Mikhail Raj Abdullah and Nurunnasihah Ahmad Rashid

KUALA LUMPUR, Feb 24 (Bernama) -- Malaysia, which is largely an export-oriented nation, must not rely solely on tariff adjustments to boost its competitiveness but also diversify its export base, said economist Nadia Jalil.

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She also said that ASEAN should strengthen itself as an economic and trading bloc by stepping up integration, raising its bargaining power, and emerging as the world’s third-largest trading bloc to stave off uncertainties arising from the global tariff chaos.

Nevertheless, Nadia pointed out that US President Donald Trump’s new 15 per cent tariffs on America’s trading partners will make Malaysia’s exports more competitive compared with the 19 per cent tariffs under the Agreement on Reciprocal Tariffs (ART) signed between both countries last October.

She said this was incumbent upon Washington imposing a similar rate on other countries that export the same goods to the United States.

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Diversify export destinations, strengthen ASEAN integration

In welcoming the new US tariff rates under Section 122 of the Trade Act of 1974, Nadia said Malaysia should continue diversifying its export destinations, reduce its dependence on the US, and strengthen its external resilience.

“We should be happy with lower tariffs because that would mean our exports are more competitive. 

“It is important Malaysia is not disadvantaged in terms of other countries that are exporting the same goods to the US,” she said today after appearing as a guest on Bernama TV’s The Nation programme on “Global Trade Amid Geopolitical Tensions” hosted by Jessy Chahal.

Nadia added that strengthening ASEAN integration would provide Malaysia with greater collective market scale and bargaining power, enabling the region to better navigate uncertainties arising from shifting global trade policies.

“The first step is actually to strengthen ASEAN as an economic and trading bloc, as there is always strength in numbers.

“When you say ASEAN is one big market, you become perhaps the third-largest trading bloc in the world. This is where ASEAN should move into,” she said.

She added that tariffs function primarily as import duties borne by consumers in the destination country, meaning lower tariff levels could help sustain demand for Malaysian goods despite ongoing protectionist measures.

“Because the people who pay for the tariffs are not going to be the exporters. It’s going to be the consumers, as it is an import duty,” she said.

However, Nadia cautioned that Malaysia should remain mindful of potential sector-specific tariff developments, particularly in key export segments such as electrical and electronics (E&E), including semiconductors, which continue to underpin the country’s trade performance.

The economist said long-term competitiveness would depend on structural upgrades across industries, including moving into higher value-added activities in manufacturing and in resource-based sectors such as palm oil and petroleum-related industries, factors that go beyond tariff dynamics.

“We have heard about going higher in the value chain, not just in the E&E sector but also in other sectors like resource-based industries like palm oil.

“We always need to move towards higher value-added activities,” she said.

During today’s parliamentary session, Prime Minister cum Finance Minister Datuk Seri Anwar Ibrahim said the government will continue monitoring developments regarding the ART in the US, follow up on actions taken by Trump and examine various aspects to protect Malaysia’s interests.

On Feb 20, 2026, the US Supreme Court struck down tariffs under the International Emergency Economic Powers Act, which formed the legal basis for Trump’s actions, including retaliatory tariffs.

Earlier, Trump reportedly said he would raise the global tariff to 15 per cent from 10 per cent, following the Supreme Court’s decision to overturn most of his previous trade measures.

In a post on his Truth Social on Saturday, the US president said the increase, to be implemented under Section 122, would take effect immediately and exceed existing tariffs.

-- BERNAMA