US Trade Deals Raise Regional Stakes in Asia-Pacific

Malaysia Faces Pressure After US Seals Trade Deals with Japan and the Philippines

KUALA LUMPUR — The United States has signed new tariff agreements with Japan and the Philippines, which could reshape regional trade flows. Economists are now urging Malaysia to move quickly and secure its competitive position before the window narrows.

On July 22, US President Donald Trump announced a 15 percent tariff on Japanese imports, including automobiles. Cars remain the biggest part of the US-Japan trade gap. A separate deal with the Philippines set tariffs at 19 percent — matching Indonesia’s rate and just below Vietnam’s 20 percent level. These developments signal that Southeast Asia is entering a new era of bilateral trade competition.

These agreements show that Washington is rewarding countries that sign bilateral deals. In return, Indonesia removed tariffs on over 99 percent of US goods. Japan also agreed to open its markets to US rice, cars, and agricultural products. Additionally, it pledged a US$550 billion investment in the American economy — a figure that underscores the strategic importance of these partnerships.

Malaysia Must Act Fast to Avoid Being Left Behind

Experts believe the current momentum could sideline nations that fail to secure similar terms. With global manufacturers and investors watching closely, timing has become critical.

“The US-Japan and US-Philippines deals suggest Washington is rewarding bilateral agreements with tariff relief. That puts pressure on countries without deals, like Malaysia, to secure similar access or risk being sidelined for future export-led foreign direct investment,” said SPI Asset Management managing partner Stephen Innes.

Innes added that Malaysia still plays a strong role in the region, especially in the semiconductor and electronics sectors.

“While sectors such as automotive and final-stage electronics might see shifting investment flows, Malaysia’s established role in the semiconductors and E&E supply chain remains a key asset. Malaysia still offers strong fundamentals (particularly in electronics), but in this environment, trade certainty is a competitive edge. Bilateral talks with the US should now be a priority,” he said.

Malaysia’s involvement in global supply chains, particularly in high-value components, gives it leverage — but only if supported by timely policy decisions.

Product Differentiation Can Be Malaysia’s Advantage

To stay relevant, Malaysia must not only match tariffs but also showcase unique value that rivals cannot easily replicate.

Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, agreed that the risk of losing ground is real. He believes Malaysia must stand out.

“Areas like halal certification can help Malaysia carve a niche where our products and services remain highly sought after, despite the higher tariffs US consumers might have to pay,” he said.

Beyond certification, Malaysia’s experience in electronics remains a strength worth leveraging in a tight investment climate.

Afzanizam also commented on concerns over losing ground to Japan or the Philippines in the electronics and auto sectors. He believes Malaysia’s existing strength still holds.

“Malaysia has established its footprint in the OSAT segment of electronics. Given our economies of scale, it may be quite difficult for other countries to replicate our capabilities,” he said.

This advantage, however, must be paired with diplomatic agility if Malaysia hopes to maintain investor confidence.

Time Is Running Out Before the August 1 Deadline

The clock is ticking. With just days before the new US tariff regime activates, Malaysia’s position in the trade hierarchy may shift — depending on how it responds now.

Economist Dr. Geoffrey Williams warned that deals with Japan, the Philippines, Indonesia, and Vietnam are putting Malaysia at a disadvantage.

“It will affect trade and FDI because companies will locate FDI to countries with lower US tariffs,” he said.

He noted that Malaysia’s vehicle exports may not suffer, but the component and electronics sectors could.

“It may not affect semiconductors but could affect other electrical and electronics. It will not affect automotive because Malaysia does not export vehicles, but it could affect components. The lesson is clear: Malaysia must go zero-tariff and try to reduce non-tariff barriers to compete. There is only one week left,” he said.

Market Reacts Quickly to Strategic Deals

Investors are already shifting their focus in response to these new dynamics. Analysts say that markets are primed for volatility as each trade announcement changes the investment landscape.

Stephen Innes pointed out that with August 1 approaching, traders are reacting swiftly to new headlines.

“This one hits all the right spots, including autos, agriculture, liquefied natural gas, and even the promise of future investment. The US$550 billion figure Trump floated may be fuzzy, but the market does not care. The trade tape was primed, and this was the spark,” he said.

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