Trade, turbulence and triumphs

Malaysia has weathered the storm during the trade and tariff disruptions of 2025 and cementing and building on the gains must continue into 2026.

Trade and the impact of the so-called Trump tariffs have dominated the headlines during 2025.

Despite the conventional wisdom of the shroud-waving anti-Trump, anti-tariff, arm-chair commentators, Malaysia’s trade performance has actually hit record levels.

Malaysia External Trade Development Corporation (Matrade) data for January-November this year shows overall trade 5.8% higher, imports up 6.1%, exports rose 5.6% and the net trade contribution to GDP is 10.7% higher than over the same period in 2024.

For trade with the US the figures are remarkable for how far away they are from the doomsday scenario after “Liberation Day” on April 2.

Exports to the US rose by 13.9% during January-November. Imports from the US rose by 7.9% and the overall trade surplus with the US rose by 19.5%. So much for the devastation predicted by the anti-Trump pessimists.

For China enthusiasts the figures are more sobering. Exports to China rose by only 1% during January-November, imports are up 18.1% and the overall trade deficit with China rose by a staggering 46.6%. This is a drag on overall economic growth.

It has certainly been a turbulent year for trade with the trade balance toying with a deficit in May, hitting only RM760 million in the black. In November net trade fell 70% compared to October and 58.8% compared to November last year.

The declining trend in the trade balance since August 2023 looked like it might have reversed but instead it has seen a sharp correction and become more volatile which is a cause for concern.

Having gone through a period of significant uncertainty this year, Malaysia must look to create stability and consolidation in trade policy next year. So talk of renegotiating the Agreement on Reciprocal Trade (ART) is already a very worrying sign.

First it suggests that former investment, trade and industry minister Tengku Zafrul Aziz and his team did a bad job. Second it suggests that the ART was bad for Malaysia when in fact tariffs were slashed by both sides.

During the negotiations Malaysia offered to reduce tariffs on over 98% of imports from the US, covering 11,260 out of 11,444 product lines. Malaysia already has zero-tariffs on 6,567 products and exempted an additional 344 products under the ART. In return the US exempted or zero-rated 1,700 tariffs, meaning that more than 2,000 tariffs were removed.

This reduced Malaysian exposure to US tariffs to just 4.6% with 62.8% of exports exempted which is one of the best exemption performances in Asean according to CGS International Securities Malaysia Sdn Bhd.

Second renegotiation of ART signals a return to protectionist policies that insist on non-tariff barriers to trade that the agreement aims to remove. This does not help Malaysian businesses or consumers. It helps only vested interests, monopolies and cartels which will discourage trade and foreign direct investment.

It is a regressive step after the huge benefits gained during the ART negotiations which can be seen in both the bonfire of tariffs and the surge in trade performance.

Talk of the ART threatening national economic sovereignty seems rather overstated. First trade is conducted by companies, not by governments and trade arrangements are set to help companies compete on a level playing field.

Second trade is between willing buyers and willing sellers. There is nothing in the ART that forces Malaysians to buy anything from the US that they do not want or were not already buying.

Third, trade is not a zero-sum game, everyone benefits from the gains from trade in competitive, agile and innovative free markets with low tariff and non-tariff barriers.

Stabilising and cementing the gains from the ART, not opening up old wounds, should be the focus of trade in 2026. - FMT

The views expressed are those of the writer and do not necessarily reflect the views of MMKtT.