The world is once again staring down the barrel of an economic crisis, this time triggered not by war or a pandemic, but by the return of extreme protectionism. Former US President Donald Trump’s recent announcement of sweeping tariffs — targeting virtually all trading nations — marks a dangerous turning point in global economic policy. These tariffs, if fully implemented, could trigger a global recession or worse, and for small open economies like Malaysia, the implications are serious and far-reaching.
To understand the rationale behind Trump’s tariffs, we must look beyond economics to the ideology of economic nationalism. Trump has long claimed that global trade has undermined the American economy, blaming countries like China, Mexico, Germany, and even close allies for creating trade imbalances that disadvantage American workers. His response has been to impose protectionist tariffs in an attempt to bring manufacturing back to the US and reduce trade deficits. However, this approach misinterprets the dynamics of global trade. Tariffs are blunt instruments that not only raise the cost of imports but also disrupt global supply chains and provoke retaliation. History offers a clear warning: in the 1930s, the Smoot-Hawley Tariff Act contributed to a collapse in global trade and deepened the Great Depression.
We are at risk of repeating that mistake. A full-blown tariff war in today’s interconnected world could lead to a synchronised global slowdown. As tariffs raise costs, inflation rises, central banks tighten interest rates, and investment contracts. Consumers pull back on spending, businesses delay expansion, and uncertainty dominates financial markets. Malaysia, whose economy is highly dependent on trade — with exports accounting for over 130% of GDP — is particularly vulnerable. Our electronics sector, palm oil, rubber, and machinery exports are integrated into global value chains. When the global economy slows, demand for these products shrinks, affecting our industries and jobs.
Although Malaysia may not be a direct target of Trump’s tariffs, we are collateral damage. When the US targets China, for example, the shockwaves ripple through regional supply chains that include Malaysian manufacturers and exporters. Foreign direct investment may slow as companies rethink their Asia strategies, while our exporters face rising costs and shrinking markets. Investor confidence will also be tested, and ringgit volatility may return. These factors combined could push our economy toward stagnation — or worse, contribute to a broader regional downturn.
But Malaysia is not powerless. There are clear steps we can take to safeguard our economic future. First, we must stimulate domestic demand. We cannot rely solely on external markets. By increasing wages, strengthening social protection, and supporting small and medium enterprises, we can drive internal consumption and create a stronger, more balanced economy. Second, we must diversify our trade and investment partners. Our heavy reliance on the US and China makes us vulnerable to shocks. We must deepen ties within ASEAN, and build stronger economic bridges with emerging markets in Africa, Central Asia, and Latin America. Third, we must future-proof our economy by moving up the value chain. That means investing in high-value industries like renewable energy, biotechnology, artificial intelligence, and advanced electronics — sectors that are more resilient and offer better long-term prospects.
Fourth, Malaysia must reinforce its commitment to multilateralism. We have long benefitted from international institutions such as the WTO, APEC, and now RCEP. These platforms are our best defence against economic nationalism and trade unilateralism. We must push for reforms that make these institutions more transparent, more equitable, and more effective in settling disputes. At the same time, we must build strategic buffers by strengthening our fiscal reserves, ensuring food and energy security, and investing in public infrastructure. A shock-proof economy also requires a skilled, adaptable workforce. We must invest in STEM education, vocational training, and digital literacy to prepare Malaysians for the industries of tomorrow.
Finally, we must be realistic. Trump’s tariffs are not just an economic strategy — they reflect a deeper shift in global politics. The era of unrestrained globalization is coming to an end. The world is entering a new phase marked by rivalry, realignment, and regionalism. Malaysia must adapt to this new reality with clarity and courage. We cannot remain bystanders. We must lead by example — through bold policies, principled diplomacy, and national unity.
Malaysia has the talent, resources, and resilience to weather this storm — and to emerge stronger. Let this be a wake-up call: we must build a future that is less vulnerable to the whims of foreign powers and more rooted in our own strengths. In doing so, we will not only protect our economy — we will secure a better, fairer, and more sustainable future for all Malaysians.