Economists cast doubt on grounds for Trump’s unfair trade probe

2026-03-17 - 23:21

Donald Trump’s administration may be looking to rebuild its case for the imposition of tariffs after an adverse decision by the US Supreme Court recently, says an analyst. (EPA Images pic) PETALING JAYA: Economists have questioned the motive for a US investigation into allegations of unfair trade practices by Malaysia on the basis that trade surpluses should not always be grounds for such probes. Universiti Teknologi Petronas adjunct lecturer Samirul Ariff Othman and Bait Al-Amanah economist TKS Yugendran said a trade deficit should not automatically be seen as “unfair”. Samirul explained that a large portion of Malaysia’s exports to the US consists of electrical and electronics (E&E) components, as well as semiconductor packaging and testing — intermediate goods embedded in global value chains, many involving American firms. “In other words, the deficit partly reflects the fragmented nature of modern manufacturing, where production stages are distributed across countries,” he told FMT. Samirul Ariff Othman. Last Wednesday, US trade representative Jamieson Greer announced that the US was launching investigations into allegations of excess industrial capacity in Malaysia and 15 other major trading partners, an outcome of which could lead to new tariffs being applied under the Trade Act. Greer said the probe on Malaysia will target its alleged excess manufacturing in the electronics, machinery, and steel sectors, citing persistent goods trade surpluses as evidence of structural overcapacity. Goods trade between the US and Malaysia reached approximately US$88.5 billion in 2025, with American exports to Malaysia amounting to about US$28.9 billion and imports from Malaysia at roughly US$59.7 billion, resulting in a deficit of around US$30.8 billion for the US. On the other hand, Samirul pointed out, the US maintains a services trade surplus with Malaysia, a factor that often receives less political attention despite it still being economically significant. TKS Yugendran. Yugendran said the US$30.8 billion trade deficit for the US simply reflects the fact that production cost in the US is high, and Malaysia is able to meet that demand, especially in the E&E sector. Trump’s Plan B? Samirul suggested that the probe may be an attempt by the Trump administration to rebuild a case for imposing tariffs against Malaysia in light of the US Supreme Court’s decision to overturn the sweeping tariffs levied on numerous countries under the International Emergency Economic Powers Act. The investigations are necessary for Trump to employ the Trade Act to unilaterally place duties on imports from countries deemed to be employing unfair trade practices. The court ruled that Trump had exceeded his constitutional authority by imposing the tariffs under the statute reserved for use in genuine national emergencies. “From that perspective, the new investigations can be seen as a way to rebuild legal grounds for tariffs under the Trade Act,” said Samirul. He said that while such investigations may have merit as system-wide inquiries into global industrial capacity, applying the same framework to all economies — including smaller manufacturing hubs like Malaysia — may not fully capture the complexities of these supply chains. Nonetheless, Yugendran remains optimistic that US-Malaysia trade will remain strong despite “short-term hiccups” from the probe. “We have been strong trading partners for years, and I do not foresee that changing in the long run,” he said. “Tariffs are not sustainable.”