THE decision by US to impose import tariffs on goods coming in from the rest of the world, would indirectly cause a price war among exporters, say prominent economists.
Malaysia, who faces a 25% tariff, is among several others who have high exports to the US, and may need to adjust pricing and costing to keep the export momentum going.
US President Donald J. Trump in a letter to the Malaysian authorities, cited that the import tariff of 25% would be imposed from next month.
But at the same time, Malaysia is moving to diversify its export base to the rest of the globe - the question is now how fast and effective can new trade deals be adopted.
Both Prof Dr Yeah Kim Leng and Prof Emeritus Dr Barjoyai Bardai acknowledged that there would be a major impact on the global economy and within Malaysia while the prospects for inflation to rise are real.
Yeah is lecturer at the Sunway University while Barjoyai lectures at various institutions, including Universiti Tun Abdul Razak.
They said the country just like other nations needs to face up to the trade realities of today.
Yeah said that exporters worldwide now need to adjust their costing to meet import tariff hikes.
"If they cannot, then they need to find new markets or ways of negotiating with the US on how best to soften the impact."
Yeah, who is also the Bank Negara monetary policy committee external member, said that consumption would also drop as consumers adjust to the new prices as US importers need to pay for the additional tariffs.
In the mid to long-term, Malaysian exporters need to adjust their pricing to export overseas, especially to US.
There would also be a readjustment to the supply chain.
"Our exporters need to be cost competitive to compete, especially if they want to trade with the US."
In the long-term, Yeah said that such conditions imposed by US need time to settle down in the markets but Malaysia is left with no choice but to shun the US.
"It brings more uncertainty and makes the global economy fragile. That is the new reality."
US consumers also end up having to pay for the additional import tariffs, especially on essential items.
Yeah said that Trump may want to bring back manufacturing to the US, but this would take time because the cost is too high.
Alternatively, perhaps high value manufacturing can be resettled in the US if its operating costs tallies with what US living costs provides, he added.
Barjoyai said that US has every right to do what they want to protect their markets but exporters also need to do what is best for their respective companies.
"The point is whether our exporters are willing to bear the 25% hike or would US importers do it."
The answer is neither of both parties can manage it.
Malaysian exporters with profit margins of between 10 and 15% may face difficulties to export to the US with the 25% tariff.
Their only solution is to explore new markets and abandon the US.
Providing some costs analysis, Barjoyai said that the export volume for Malaysia would reduce from RM196 billion to RM110 billion.
That is a trade loss of RM86 billion a year, he said.
In turn, it will affect about 5% of the gross domestic product (GDP) and the working-class purchasing power parity would also go down with inflation going up.
"I think the local domestic consumption rate may see up to RM2 billion in annual loses. That is a big sum."
US consumers would also be affected, hence the chain of reaction to the global markets, said Barjoyai.
Hr urged for sensibility and practicality to emerge in the global trade issues - saying that in the end, everyone should benefit and not suffer from trade. - July 8, 2025.
