The RM1 trillion question haunting Anwar as outcome of tariff talks comes under fire

Prime Minister Anwar Ibrahim's ability to steer the country in the face of global economic challenges following US President Donald Trump's tariff threat is increasingly panned by experts, even as Putrajaya launches a media campaign touting the "success" of its negotiations that resulted in Washington's decision to impose a 19% import tariff on Malaysian goods. 

At the heart of the mounting criticism by economists, political leaders and analysts is the disparity between the offers to the US of purchases and investments worth over RM1 trillion and the actual costs incurred as a result of the 19% tariff on Malaysian exports. 

Those who spoke to MalaysiaNow said that no clear returns could be assessed from an economic perspective, especially when compared to the amount of investment commitments announced. 

These commitments include the mutli-billion dollar purchase of Boeing aircraft as well as the acquisition of technology and cooperation in infrastructure involving major national companies such as Petronas, Tenaga Nasional Bhd, Telekom Malaysia, and several semiconductor industry players.

Malaysia also agreed to eliminate import taxes on the majority of 11,000 US products, and to supply rare earth elements.

"For this, we only get a reduction in US tariff of 6% (from 25% to 19%). That is not a good deal," said former prime minister Dr Mahathir Mohamad. 

The 19% rate however has been repeatedly commended by Investment, Trade and Industry Minister Tengku Zafrul Aziz, who acknowledged Malaysia's total commitment of over US$240 billion or RM1 trillion. 

However, the fairness of the exchange remains under question.

Economist Carmelo Ferlito said the tariff rate previously imposed on Malaysian goods was only about 2% to 3%. 

"Tariffs were not reduced. They were never 25%. They were threatened to go at 25% and this was the starting point of Trump’s negotiations, a good businessman strategy," said Ferlito, who leads think tank Centre for Market Education.

"So tariffs were not reduced, but increased."

He said the government's claims about the success of its negotiations, if factually assessed, would instead highlight concerns about Malaysia's huge commitments. 

'No benefit at all'

Noting the total value of foreign trade at US$681 billion (RM2.87 trillion) last year, he said Malaysia's commitment to spending US$240 billion (RM1.14 trillion) in investment and the purchase of US goods would reach 35% of that amount.

He said Malaysia's total exports to the US last year reached RM198.6 billion, while total imports from the US were RM126.2 billion – a trade surplus of RM72.3 billion (US$17.2 billion).

He then compared this to the total value of Malaysia's economic commitment to the US – a whopping US$240 billion.

"This means that Malaysia’s commitment towards the US is around 13 times the amount of Malaysia’s trade surplus vs the US," he told MalaysiaNow, adding that Malaysia's tariff talks with the US had brought the country no benefit at all. 

"Trade is never between states, but between firms. Therefore, the deal will have to face later on firms’ commitment to the same deal," he said. 

"Trade among firms responds to economic logic rather than geopolitical ones."

He said Malaysia's move to cut or eliminate tariffs on a large number of US goods was not a problem as it would ultimately benefit consumers while increasing competition. 

However, he warned that the real benefits would only be enjoyed if local businesses were prepared to compete fairly and efficiently in an open market system.

'Smoke and mirrors'

Economist Geoffrey Williams also questioned the touted success of Malaysia's tariff negotiations with the US. 

Speaking to MalaysiaNow, he said the government's narrative was nothing but "smoke and mirrors". 

Giving the example of the Boeing purchase, he said that high demand for the aircraft at the global level might cause delays in deliveries. 

"The new orders may not appear until long after Trump has ended his presidency. The orders could then be cancelled. 

"The number of planes is smaller than other countries and it is not clear if this is a normal replacement of the fleet, the substitution of Boeing in place of Airbus, or actual new net investment," he said.

He, too, said that a 6% reduction in tariff was too low, and would not put Malaysia on better footing compared to other Asean nations. 

"Malaysia is in the same position as most other Asean countries and worse than many other countries," he added. 

"It is at a disadvantage to Singapore and the EU, Korea and Japan."

He said what was being portrayed as an achievement was merely the status quo, decked out in political rhetoric, adding that Malaysia was paying too high a price for something that did not exist. 

"If examined objectively, this is more of a play on perceptions, not an actual economic achievement," he said. 

It is a view held by many others, including former minister Zaid Ibrahim who said the Malaysian leadership was easily deceived.

"Trump has less than four years left in office. His protectionist lunacy, like all things Trump, is likely to end in chaos, either at the ballot box or in the courts. 

"Why then are we so gullible? Why did our leaders panic at the first sign of pressure from a volatile foreign president?" he said. 

He said that over the next four years, Malaysia would only save US$10.4 billion or US$2.6 billion per year, based on its current export value of US$43 billion per year.

"In contrast, we committed to buying US$240 billion worth of American goods, effectively trading RM24 to save RM1. How is that sound economic policy?"