By Collins Chong Yew Keat

KUALA UMPUR, Malaysia: ASEAN alone, by itself, is simply not strong enough to serve as the alternative economic or market dependence for any of the individual ASEAN members. That is a plain and simple truth. Hence, this cannot serve as the sole economic diversification pivot, and definitely cannot serve as the intended combined weight of economic, investment, supply chain and market might to gain a higher bargaining chip with the US.

If the Trump administration under the strategic advice and tactical mastermind of Peter Navarro, Trump’s chief trade and economic advisor, can roll out such comprehensive and detailed tariff reset against all countries, and to double down on China with the recent new tit for tat tariff of a combined 104 percent tariff on China, what makes Malaysia or ASEAN think that an ASEAN combined show of strength can even push Washington to rethink the tariff?

This is sheer common sense, and how we understand Trump and the viewpoint of him in correcting this systemic injustice and ensuring that America regains its lost wealth, is extremely important for us not to be carried away in the bandwagon of global rage and to use this as an emotional and nationalistic tendency to fight back harder.

China wanted to double down and to fight all the way, but Trump is still being Trump and he does not tolerate anyone who wishes to pressure him or the Americans with threats of counter tariffs, and hence the 104 percent  tariff will take effect immediately.

It was a strategic mistake for Beijing to retaliate, thinking that it will have the edge in winning the trade war with Washington. Not with Trump. As his Press Secretary Karoline Leavitt stated, "When America is punched, Trump punches back harder".

It is important to understand the true nature of the situation and the equation at play. If we were to be drowned in this thinking that an ASEAN approach can yield higher pressure on Trump, or to seek to side with the bigger person in the room with China, BRICS or even with established US allies like the EU and Japan in fighting back against Trump’s policies, we are much mistaken. We would only receive the deeper backlash and fallout from these actions with even tougher retaliatory measures from Trump.

For us to balance our approach and to protect our national interests and regional interests, this is the time for us to face the reality that America still remains the most important economic, market, trade and security source that Malaysia and ASEAN still depend on primarily, as can be seen from this tariff fallout itself. Despite the repeated calls, actions and convenient pleas and false hopes and assurances that we give ourselves that we can easily switch to RCEP, BRICS, ASEAN, China, Global South, and the other platforms under the so-called alternative system to the US, the reality states otherwise.

This reality will be further reaffirmed when Trump’s economic revival and Make America Wealthy Again policies fully come to fruition within this short time frame, which will further widen the economic and military gap between the US and its closest rivals including China.

Despite the years of economic bandwagoning and friendshoring to these alternative platforms, we still have not received or yielded the intended real impact on our economic transformation and transition.

How Should Our Response Be?

Certainly do not go for convenient antagonistic approaches, we are only shooting ourselves in the foot.

First, move fast to negotiate and offer to lower or abolish non tariff barriers.

Second, go for a zero-for-zero tariff just like the one that the EU is now proposing.

Third, offer the best of its geopolitical strength and advantage by deepening and aligning more with the defence and security goals of both ASEAN and the US. For our own security and deterrence and long overdue common measures for defending our sovereignty and territorial integrity in the region and in flashpoints, America is indispensable, and that is common sense fact and reality although the region has been foolishly ignoring for decades now due to its own flawed self-replicating mantra of status quo neutrality and economic dependence on the economic powerhouse of its neighbour. It is time now to use this opening to deepen both economic and defence and security interdependence and partnership.

Malaysia and ASEAN should quickly go for the zero-for-zero tariff arrangement. Still, even this itself would not guarantee returns, as Peter Navarro has also mentioned that the problems with most countries are, most have both tariff and non-tariff barriers (NTB)  in place in restricting American goods. It is the NTB that provides the main challenge.

By proposing a “zero-for-zero” tariff deal with the United States, ASEAN and Malaysia would secure tariff-free entry to the world’s largest consumer market. This means Malaysian electronics, palm oil, textiles, and other exports could enter the U.S. without import taxes, boosting demand and supporting jobs at home.

The U.S. market’s sheer scale (over $25 trillion GDP) offers opportunities far beyond smaller regional markets. This will give further access to the ASEAN market to US firms, gaining access to all 660 million consumers, a win-win that can expand two-way trade. This also provides a new alternative mechanism for the US in its China economic containment. Such openness would not only enhance Malaysia’s export revenues but also incentivize U.S. businesses to increase imports from and investments in Malaysia.

A zero-for-zero arrangement would make Malaysia and ASEAN more attractive for foreign direct investment (FDI), especially from U.S. companies looking for stable production bases. With tariffs out of the way, U.S. firms in high-tech manufacturing (semiconductors, machinery, aerospace) would find it easier to integrate Malaysian suppliers into their supply chains. This is crucial as companies seek to diversify away from China amid trade wars and firms like Intel, Micron, and others set up operations in Penang to hedge geopolitical risks.

As the semiconductor is exempted from now for the tariff, this will set up the momentum positively.

A U.S.-Malaysia zero-tariff pact would cement Malaysia’s role as a reliable hub in resilient supply chains, ensuring that production can continue uninterrupted by trade barriers.

Free trade with the U.S. would facilitate greater technology exchange. American firms bring advanced technologies, management know-how, and innovation culture. In electronics, telecommunications, and digital services, Malaysia’s access to cutting-edge U.S. technology would be enhanced by closer trade ties. For instance, Malaysia’s push into Artificial Intelligence and advanced defense tech can benefit from U.S. partnerships – the U.S. is keen to offer AI and defense solutions as Malaysia modernizes its military.

The removal of tech product tariffs enables ASEAN to bring in advanced machinery and ICT equipment at lower costs which drives innovation throughout local industries. The U.S. business sector would gain advantages from Malaysia's expanding talent base together with research and development partnership opportunities.

The collaboration with U.S. expertise would enable Malaysia to ascend the value chain from assembly to design and development during this period.
A zero-for-zero trade agreement would bring substantial strategic value to both nations in addition to its economic benefits. ASEAN benefits from enhanced trade interdependence with the U.S. because it leads Washington to prioritize regional stability. Establishing stable trading relations leads to enhanced diplomatic and security cooperation between parties. The United States and Malaysia maintain ongoing maritime security cooperation as well as counter-terrorism initiatives.

The United States would enhance its Indo-Pacific strategy by establishing zero-tariff agreements throughout Southeast Asia to counterbalance moves with China in the region that also remains vital to Beijing.

It also provides the US with the head start of preventing the region from falling deeper into China's new countermove to tap into this region’s discontent with the tariffs by forging even deeper economic partnerships.

On a domestic level, zero tariffs would make imported goods cheaper for consumers in both Southeast Asia and America. Malaysian consumers could enjoy more affordable American agricultural products, machinery, and high-quality goods, while U.S. consumers would benefit from lower-cost ASEAN exports (from electronics to furniture) without import taxes. This helps curb inflationary pressures. Notably, when Vietnam floated a zero-for-zero offer to the U.S., it was an attempt to shield its export sector and stabilize prices

America Remains Central to Malaysia’s Economic Transition

America is still our foremost and most important investment power,  and remains the biggest quality investor in the country with a combined RM32.8 billion, helping to propel the economy in the second and third quarters and the ringgit currency becoming one of Asia's top performers in 2024.
The US net FDI flow in 2022 was 43 percent  of Malaysia’s total, more than the next six countries combined. Additionally, over 70 percent  of new US investments are from Fortune 500 companies.

To date, US businesses have created over 300,000 jobs.

We will need quality and long term resilience in real tangible technological transfer, a values-based economic reform and holistic transition from volume and low skilled based extractive economy to a high skilled and high income nation, a feat where current strategy of multiple economic friendshoring has not yielded results.

No longer can we rely on extractive and volume-based low-skilled sectors, which have a primary thirst for cheap and fast resources and capital, little to low-value skill and technology transfer, or dependence on volume-based markets only externally.

We are all over the place, with the chief economic focus on expanding our diversification as long as the risks with the US are divested and reduced. This is simply a mistake.  

With no focused long term approach as to how best to capitalise on our fundamental strength which will need long term trust and transparent assurance in economic and trade partnership, values-based approach and high technology and high skilled advancement of both human capital and infrastructure to escape the low-skilled, highly extractive economy and middle income that we face now, we lose out from both unreliable economic dependence, and the risks that this pivot will entail with further retaliatory and punitive measures from the US, not to mention the lost opportunity to make an early start to align with the new economic boom of America under Trump.

It is also vital for the economy to depend on a historically secured holistic partnership encompassing trade and security, to be able to operate and transact in a secure and peaceful ecosystem with enduring, resilient and predictable consumer demand and market with stable and rising demographic wealth and quality in an established political, economic and civil fusion of self-sustaining and self-correcting architecture.

Of all nations in the world, only America fits all these criteria. Hence, to ensure long term economic and trade stability based on not only volume of transaction, but the sustaining quality and wealth of equal transfer of mutual investment and dependence which encompass the equally important need of security and defence mutual dependence and commitment, Malaysia and ASEAN must be wise enough to realise by now that it has been a strategic mistake to ignore the importance and sustaining power of the US, and now is not the time to act tough in a confrontational mode with the US, with the misplaced hope that it will strengthen the so called ASEAN voice and solidarity.

ASEAN’s economic and demographic prospects have not been encouraging and powerful in the first place, and even with combined economic and supply chain might and voice, these will not influence the Trump administration to bow down to this pressure. Besides, the cracking divide inside ASEAN further weakens it, with Vietnam already making its own smart early move by talking directly to Trump.

We must not make the same mistake twice, of ignoring the US  in the past at our own peril.

*Collins Chong Yew Keat is a foreign affairs and strategy analyst and author in University of Malaya.*