US Tariff – Negotiate from a Position of Strength, Not Weakness

It has taken us decades to build a strong economic foundation, through blood, sweat, and tears. This is not something we should give away easily, especially when others are negotiating from a point of desperation. The recent tariff actions by the United States must be read not as a sign of strength, but as a reflection of weakness. The US is making an early bet while facing tightening liquidity, reduced investor risk appetite, and a broader economic slowdown, thanks largely to the Federal Reserve’s monetary policy stance.

In that context, I applaud Prime Minister Anwar Ibrahim for standing firm and criticising the US move, showing confidence that Malaysia can weather the impact. The US is so used to dictating terms globally, often with little concern for fairness, and they are quick to cry foul when other nations act in ways that do not suit their global dominance agenda.

However, invoking Thucydides and his famous line from The History of the Peloponnesian War, “The strong do what they can, and the weak suffer what they must” does not fully apply here. That war was a prolonged conflict between two evenly matched powers: Athens and Sparta. Our situation, on the other hand, is more akin to a modern-day David vs. Goliath. We could have been a bigger David if we had used our ASEAN chairmanship as leverage. Unfortunately, we missed a golden opportunity to lead with strength and unity.

The reality is that the US and ASEAN share a significant and growing economic relationship. In 2024 alone, total trade between the two reached approximately US$477 billion. The US is ASEAN’s fourth-largest trading partner, and American FDI into ASEAN surpassed US$480 billion in 2023. This strong relationship underpins the economic future of nearly one billion people across our region.

There are formal structures in place such as the Trade and Investment Framework Arrangement (TIFA) and the Expanded Economic Engagement (E3) Initiative, with collaboration expanding in strategic sectors like digital services, agriculture, and healthcare. After nearly five decades, the partnership continues to grow in ways that support a free, open, and prosperous Indo-Pacific.

Given ASEAN’s projection as the world’s fastest-growing trade bloc, this is the time for us to be assertive, not apologetic. Yet instead of asserting our collective strength, we sent a minister who was greeted with a list of arbitrary demands: reduce the trade deficit, address non-tariff barriers, strengthen tech safeguards, and explore a potential bilateral deal. It seems like we were caught off guard, negotiating in desperation rather than preparation.

We must know our non-negotiables and the give-and-take. We are a sovereign nation. The US trade deficit is the result of their own consumption patterns, not our policies. Moreover, their claim that we impose a 47% tariff is simply incorrect, and they themselves impose 24% on our goods without a proper economic rationale.

As for immediate impacts, things like divestment and supply chain relocation won’t happen overnight. But the market is already reacting. The new tariffs have shaken confidence in the US dollar. Many investors are shorting the dollar in anticipation of further decline. Asian bond markets are seeing rallies, and capital repatriation is picking up as companies hedge against volatility.

JPMorgan has put the odds of a US recession at 60%, with inflation expected to reach 4.4% by year-end. In Q1 2025, the US economy shrank at an annualised rate of -0.3%, and other indicators are flashing red. If the temporary suspension of reciprocal tariffs becomes permanent, global welfare is expected to decline by -1.2%, with the US suffering a sharper -2% loss and a -5% contraction in overall trade.

Clearly, these tariffs are unsustainable. Even Trump, in a recent NBC interview, said, “At some point, I’m going to lower them because otherwise you could never do business with them.” This signals a likely walk-back.

Instead of scrambling to address US concerns, we should be using this moment to strengthen regional economic integration. Let us not engage from a position of weakness, nor compromise our long-term national interests.

We should have condemned the US for unilaterally disrupting the global trade order. What we agree to today will shape our economic destiny for decades.

What say you?