- 17 hours ago
Global trade is entering a more volatile phase — and Malaysia is right in the middle of it.
The United States has launched a Section 301 investigation into 16 economies for “structural excess capacity” in manufacturing, a move that could reshape how major economies assess export-driven industries and supply chains. For a country like Malaysia, where manufacturing and electronics exports remain central to growth, the implications go well beyond tariffs.
Tehmina Kaoosji speaks with Jacob Lee Chor Kok, President, Federation of Malaysian Manufacturing (FMM) and Dr Juita Mohamad, Senior Lecturer in Economics at Universiti Malaya, to unpack what this investigation really signals about the future of global trade.
Is the world moving toward a more protectionist system where geopolitics shapes market access? How exposed is Malaysia’s export-led manufacturing model? And in a fragmented trading environment, where should Malaysian companies and policymakers position themselves next?
Catch the full conversation on Niaga Spotlight as we unpack what these shifts mean for Malaysia’s trade strategy and manufacturing future in a changing global order.
The United States has launched a Section 301 investigation into 16 economies for “structural excess capacity” in manufacturing, a move that could reshape how major economies assess export-driven industries and supply chains. For a country like Malaysia, where manufacturing and electronics exports remain central to growth, the implications go well beyond tariffs.
Tehmina Kaoosji speaks with Jacob Lee Chor Kok, President, Federation of Malaysian Manufacturing (FMM) and Dr Juita Mohamad, Senior Lecturer in Economics at Universiti Malaya, to unpack what this investigation really signals about the future of global trade.
Is the world moving toward a more protectionist system where geopolitics shapes market access? How exposed is Malaysia’s export-led manufacturing model? And in a fragmented trading environment, where should Malaysian companies and policymakers position themselves next?
Catch the full conversation on Niaga Spotlight as we unpack what these shifts mean for Malaysia’s trade strategy and manufacturing future in a changing global order.
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NewsTranscript
00:07Hello and welcome to Nyaga Spotlight with me, Tamina Kausjee.
00:10Nyaga Spotlight takes us through the week in economic analysis and future affairs.
00:15Today on Analysis, our spotlight is on Malaysia's export model being at risk.
00:20Now, global trade tensions are once again raising questions about how export-driven economies
00:25navigate a more fragmented economic landscape.
00:28Last week, the United States Trade Representative, USTR, launched a Section 301 investigation
00:35into quote-unquote structural excess capacity in manufacturing for 16 global economies,
00:42including Malaysia. And this move reflects a broader shift where trade, industrial policy
00:49and geopolitics are becoming increasingly intertwined. For Malaysia, our manufacturing sector remains
00:56a critical pillar of growth and exports. The conversation moves beyond tariffs into broader
01:03competitiveness, supply chains and how the country positions itself in the next phase of global trade.
01:09Joining us now to unpack these developments and what they mean for economic policy and Malaysian
01:15manufacturers are Jacob Lee Chorkov, President of the Federation of Malaysian Manufacturers,
01:20FMM, first and foremost. A very good morning to you, Mr. Jacob. How are you doing today?
01:25Thank you so much for making time to join us for this most essential discussion.
01:30Good morning. I'm fine and thank you for having me in your program.
01:38So if I could start by asking you from FMM's perspective, looking at global trade scrutiny and industry sentiment.
01:46Now, Malaysia's manufacturing sector is deeply integrated into global value chain,
01:52of course, especially in areas like electronics and industrial components.
01:57As these discussions are emerging around issues such as structural excess capacity in manufacturing,
02:05how closely are our Malaysian manufacturers monitoring these developments?
02:12Yes, indeed. Recently, we understand the United States Trade Representative.
02:18They have initiated a probe on Malaysia using the 301 initiative on the structural excess capacity,
02:28as you have mentioned. The Malaysian manufacturing industry look at this very seriously because
02:34our economy is a manufacturing-led economy, and the United States is one of our largest bilateral trade partners.
02:45Perhaps I would want to go into explain a little bit about what does a structural excess capacity means.
02:53It is a specific legal and economic term being used to justify new tariff following the U.S. Supreme Court's
03:06recent ruling
03:06that limited certain other emergency tariff power.
03:11So, structural excess capacity is not a cyclical excess capacity.
03:20Cyclical excess capacity happens under normal market fluctuation, where demand temporary drops.
03:29However, structural excess capacity happens when, number one, production levels that do not respond to the domestic or global market
03:42signals.
03:43In other words, production is untethered from demand. It is not relevant to the demand of the market.
03:51Number two, it is a sustained access through government intervention
03:58that incentivizes the companies to maintain or expand the unused capacity inefficiently.
04:08And lastly, it also points to its persistent surpluses.
04:14There are long-term trade surpluses as the excess goods are pushed into the global markets at artificially low prices.
04:24So, the USTR office is having an investigation into this. I think they are having a hearing sometime next week
04:34or the following week.
04:36So, we will probably have to wait and see.
04:39And this is quite serious because if we were to look into the tariff stacking after this investigation, the total
04:49tariff could amount to 42%.
04:52You know, in other words, like for the base duty, like 2%, anti-dumping as well, 15%, and 301 is
05:03amounting to 25%, a total of 42%.
05:06So, the industry will look at how the hearing will go on, what are the evidence that the US government
05:16is producing to us, and we are watching it very closely.
05:22Absolutely. Thank you very much, Mr. Jacob, for actually explaining to us what exactly the terminology means.
05:27So, certainly, Malaysian manufacturers are definitely justified in asking all of these questions about what this means for the immediate
05:34future.
05:35Moving along, Mr. Jacob, looking at Malaysia's position in global supply chains.
05:40Now, in an environment where trade policy and geopolitics are increasingly shaping market access, what type of strengths does FMM
05:49see Malaysian manufacturers continuing to bring to global supply chains,
05:55which of course help Malaysia to remain a trusted production hub?
06:02In brief, I could probably summarise the strength of Malaysia in broadly four areas.
06:10Number one, Malaysia adopt a neutrality, non-alignment diplomatic position where we are not aligned to US, we are not
06:23aligned to China.
06:25I think that has gained Malaysia a very good advantage.
06:30The reason China plus one or even Taiwan plus one policy has somewhat benefited Malaysia and due to the geopolitical
06:41tensions and also the trade war between USA and China.
06:47And there are many realigning, the shifting of the global supply chains to Southeast Asia.
06:56Malaysia is one of the preferred destinations.
07:01And adding to that, our Prime Minister, Datuk Sri Anwar Ibrahim, he has launched the National Industry Master Plan, NIMP
07:112030,
07:11to build a high value and high technology economy and bringing in a lot of emerging technologies and companies to
07:25Malaysia.
07:26And that provided Malaysia a very advantage position.
07:31On the second advantage that we have, Malaysia has been offering a very deep ecosystem for the electrical and electronic
07:45sector.
07:46This has been for the last 50 years, we have quite well established supply chains.
07:54And we are offering our tier two and tier three companies supplying to the larger companies.
08:06And this company are providing a very complete, I would say, supply chain for the semiconductor and the electronic sector.
08:18We are producing like specialized chemicals, precision toolings, machines for the semiconductor industry and the logistic industry.
08:30And in our national semiconductor strategy, the NSS, we are also funding the transition from the back end testing to
08:41the front end for the wafer propagation and design.
08:46Number three, we have a lot of free trade zones.
08:55And also we have signed many FTAs with bilateral, with country to country and even with regions.
09:03And this offers a very comprehensive and competitive trade network.
09:13Perhaps the next two points I want to talk about is every year, if you know, Malaysia produces numerous tariffs.
09:22Our universities are producing 300 to 350,000 graduates every year.
09:32And our TREC institutions are also producing 130,000 graduates and 95% or 95% to 99% employability.
09:45So with this competitive advantage that we have, these are the very strong attraction for many foreign direct investors to
10:01Malaysia.
10:02Thank you for that, Mr. Jacob.
10:04Now, perhaps in conclusion, if you could give us a couple of insights into the fact that, of course, Malaysia
10:09has been pushing to move further up the value chain.
10:12Now, from the perspective of FMM members, what kind of investment or policy support in brief would be really critical
10:19for Malaysian manufacturers to remain globally competitive,
10:23seeing as in the USTR 301 and perhaps even other future ongoing issues with tariff increases?
10:31I mentioned about the National Industry Master Plan.
10:35We have many FDIs coming in.
10:37But what are the spill oil effects for the local SME for our Malaysian industries?
10:45So FMM is working very closely with the government, in particular with MITI and MIDA to come up with this
10:58industry linkage program,
11:00where we hope to work with these multinational companies to develop the local vendor program for the import substitutions,
11:14of their parts and components, so that we would develop more Tier 2 and Tier 3 companies in Malaysia.
11:24And that is also exactly the reason why FMM has been advocating for the redefinition of SME industry, the small
11:34and medium industry.
11:36Many of our Tier 2 and Tier 3 companies, they are too big for SME.
11:42So much so that, but they are too small to be a global player.
11:49And so much so that, it is difficult for them to move up the technology value chain,
11:55because they still need a lot of funding, a lot of support from the government to transform themselves.
12:02So we are hoping that to redefine, to move the SME definition.
12:10Currently, SME defined as company that employ less than 200 people,
12:18a company that has revenue of less than 50 or 50 million and below.
12:24So we hope that to redefine it, to cap it at 100 million and below and 300 employees,
12:36that will qualify many Tier 2 and Tier 3 companies or bigger SME at the moment for the government incentive
12:46program to move up the value chain.
12:49Thanks very much for those insights, Mr. Jacob.
12:52Now, as we move into a last discussion area, looking at responsible manufacturing and future growth.
12:58So global buyers, Mr. Jacob, are placing increasing emphasis on transparency, labour standards and supply chain governance.
13:07How are Malaysian manufacturers responding of late within even this past two months of this year to these expectations?
13:17And what opportunities does FMM see for the sector as Malaysia also strengthens our reputation as a responsible and high
13:26quality manufacturing base?
13:29These questions are very seriously as well.
13:34You know, we also employ many of these foreign workers.
13:40However, globally, not just only Malaysia, sometimes these foreign workers,
13:47they label the employers as the modern slavery employment.
13:58Also, we are practising forced labour, giving not so good treatment to the foreign workers.
14:07I think there is a bias in the matter.
14:12So FMM has been advocating for the digital process for the foreign worker recruitment,
14:24so that we can actually monitor how the process, the whole process of recruitment,
14:34so that we do not want to see that workers from, say, Bangladesh or from Nepal,
14:43they are paying like 20,000 to 5,000 ringgit to come to Malaysia and work.
14:49Some even lamented that they need to sell their house,
14:53they need to take up a loan to come and work in Malaysia.
14:57So we suggest to the government that the whole recruitment system end-to-end to be done by digital platform,
15:10so that it is transparent, the whole process is visible.
15:16And the employer may not have the means to change the ecosystem,
15:24the systemic problem that exists in the ecosystem.
15:28However, the employer has the freedom.
15:32We have the option to choose the worker source from countries that do not need to pay high fees to
15:44come and work in Malaysia.
15:45Thank you very much for those insights.
15:49Now, clearly, global trade is becoming more complex,
15:52with markets being shaped increasingly by geopolitics and industrial policy.
15:56For Malaysia, that means strengthening competitiveness,
15:59deepening its role in global supply chains,
16:01and positioning the manufacturing sector for the next phase of trade.
16:24Now, everyone, moving on into the second segment for Niagara Spotlight today,
16:28we've heard from Jacob Lee, President of Federation of Malaysia Manufacturing, FMM,
16:34and now joining us to unpack what these developments mean for wider economic and trade policy,
16:42Dr. Juwita Mohamed, Senior Lecturer, Department of Economics and Business at the University of Malaya.
16:48Dr. Juwita, thank you so much for making time for us. Good morning to you.
16:52Good morning. Thank you for having me.
16:53Dr. Juwita, so let's go into, firstly, the weaponization of trade law, which is what we're seeing unfold here,
17:01and the United States increasingly using tools such as Section 301 investigations to scrutinize trading partners.
17:08So from a global trade governance perspective, are we seeing trade law evolving into, well,
17:18a strategic instrument of economic power rather than a mechanism to address unfair practices?
17:25Your thoughts on this?
17:26So what we're seeing is a broader shift in how trade policy is being used.
17:34Historically, we see that tariffs and trade remedies were designed as defensive tools,
17:41and these mechanisms are used to address unfair trade practices such as dumping or subsidies.
17:50But increasingly, they are also being used as instruments of strategic economic pressure,
17:56or in some cases, they do call it strategic economic coercion.
18:02So the US has long used tariffs as leverage in trade disputes, and they're often linked to concerns over its
18:12persistent trade deficit.
18:14So in order to justify these trade hikes, tariff hikes, actions are typically being framed within existing trade laws.
18:28So for example, through the investigation through Section 301, which provides the legal basis for imposing such measures.
18:38But what is somewhat different in the current context is the way the process is unfolding politically.
18:45So traditionally, major trade actions would involve consultation with Congress in the US before implementation.
18:55Even during the Obama years, he had a fast pass for the TPP negotiations, but that fast pass was granted
19:09by the Congress.
19:10So he had Congress backing him.
19:13But in recent years, during the Trump administration, we have seen instances where actions are taken first under executive authority,
19:22and only later will it be challenged or reviewed through the courts.
19:28So this creates a cycle where policy moves forward first and legal interpretation would follow.
19:36But what is particularly surprising in this case is that these investigations are occurring despite the existence of an active
19:46or live trade agreement between the US and Malaysia.
19:51So normally a trade agreement is meant to address these disputes and these concerns.
19:59So when an investigation is launched against a country like Malaysia that already has a signed trade deal with the
20:07US,
20:08it raises questions about whether those established mechanisms are going to be fully utilized.
20:15From a trade governor's perspective, it also raises broader questions about good faith in the implementation of trade agreements.
20:24So again, what Malaysia is doing now is reviewing and also asking for clarity and even the credibility and the
20:34legitimacy of those agreements in the wake of these investigations and tariff hikes.
20:41And clearly also when it comes to mid-sized economies like Malaysia, it also appears that we are now becoming
20:47a little more exposed to these unilateral trade actions compared to maybe rules-based enforcement.
20:54I think it also raises wider questions about the World Trade Organization and their dispute system and whether or not
21:01this contravenes.
21:02Thanks for the perspectives, Dr. Jurita.
21:04Moving into looking at neutrality versus strategic positioning.
21:10Now, Malaysia has, of course, traditionally positioned itself as an open, neutral trading nation, very deeply integrated into supply chains
21:18linked to both the US as well as China.
21:21Now, in a world where trade and geopolitics are becoming increasingly intertwined, is neutrality still a viable economic strategy?
21:31So as you mentioned, Malaysia is a small, open economy, and it's always very difficult to take sides in major
21:39geopolitical or trade tensions.
21:43But ultimately, when I ask this to myself, the answer is very clear.
21:48The side that we should be on is actually our own side.
21:54So meaning, whatever best serves our national interests economically, security-wise, or socially, that should be our side.
22:04So if we put it in simple, maybe philosophical terms, guiding principles should always be what is best for our
22:12country.
22:13So as a rule of thumb in international trade, when a partner becomes increasingly erratic or uncertain, it would not
22:23be wise for us to put all of our eggs in one basket.
22:28So diversification becomes a very rational strategy.
22:34And this is not about turning away from any particular partner, but it's about ensuring resilience and our survival in
22:47this global context.
22:49So one approach is again to continue engaging where it makes sense.
22:55But at the same time, we need to be reducing excessive dependency on a major country.
23:02And at the same time, also cast a wider net in building relationships with existing or new trade partners.
23:11So again, this would strengthen our bargaining power and also reduce our vulnerability to sudden policy shifts by any party.
23:23So in that context, doing business with the US now has become increasingly more expensive and it has become more
23:35costly and more unpredictable, by the way, than previously anticipated.
23:42So if those costs begin to outweigh the expected gains from trading with the US, then it becomes entirely reasonable
23:52for us to reassess how much reliance we place on this type of relationship.
23:58And and and we need to also survive and to survive, we need to be able to explore other alternative
24:07partnerships that offer greater stability and also greater predictability.
24:14Definitely. So countries like Malaysia may eventually have to take clearer strategic positions in the in the months to come.
24:22Dr. Juwita, let's look a little bit, spend some time on Malaysia's industrial structure.
24:26Now, allegations around, quote unquote, structural excess capacity.
24:31They raise deeper questions about how economies build our individual manufacturing scale.
24:37Now, does this suggest that Malaysia needs to perhaps rethink aspects of our industrial structure, particularly how we move further
24:46up the value chain and also then perhaps differentiating ourselves from other export driven economies?
24:54For me, I would like to contest this allegation.
25:01So this is one of the many, the one of two allegations that's made by USTR.
25:08The first one, as you mentioned, is on having excess production capacities in sectors like electronics, machinery, steel.
25:21And the other one is on labor, forced labor.
25:26So we're not going to touch on forced labor.
25:31But structural excess capacity here to me is very much linked to an economic perspective.
25:38So the argument here needs to be understood more carefully.
25:43So this is one of the most fundamental principles of comparative advantage and also international trade.
25:50So if a country like Malaysia is able to produce certain goods more efficiently and at a lower cost than
26:00other countries.
26:01So it is entirely normal and it makes economic sense for that country to specialize in those industries and export
26:11the surplus to the rest of the world.
26:13So this is how global trade is supposed to function.
26:16This is how global trade has been functioning.
26:19So countries produce what they relatively are better at producing and they would import those products that they're not good
26:28at producing.
26:29Right. So from that perspective, so I've laid down the ground rules of international trade, but you also have to
26:40see it from the consumer perspective.
26:41So when industries have large production capacity and they operate efficiently, it will bring down the unit, the cost per
26:52unit lower.
26:54Right. So consumers actually benefit from these affordable products.
27:00So it can also include high quality products like electronics and green technologies.
27:09But putting that aside.
27:12What is important is that having excess capacity does not automatically mean dumping.
27:19So this is this is what is being is.
27:25Yes, yes.
27:27You have excess capacity.
27:28So you're dumping.
27:29So dumping actually refers to selling products below costs or below market price and selling them at prices lower
27:39than those charge in the producers or in the producers domestic market.
27:45So that's not happening. Right.
27:47So what you would have the producers prices so low only if you have illegal subsidies.
27:55So so far that hasn't been very apparent.
28:00It's not apparent in the semiconductor subsector, for example.
28:04Sure.
28:05So if goods are being produced efficiently and if they're sold at market price, which it is being sold at
28:11market price,
28:13then what we're seeing is not dumping.
28:15It is simply competition.
28:18So this is why I'm contesting.
28:20Which is also a part of global trade, naturally.
28:23Thank you very much for your for your time and insights.
28:27That was most informative.
28:29Now, global trade, of course, is becoming more complex with markets being shaped increasingly by geopolitics and industrial policy, too.
28:37For Malaysia, that means strengthening our competitiveness, deepening our role in global supply chains and positioning the manufacturing sector for
28:45the next phase of trade.
28:46My thanks to Dr. Duita Mohamed, senior lecturer at University of Malaya, and also Jacob Lee Chirokok, president of the
28:53Federation of Malaysian Manufacturers.
28:55That's all we have time for today.
28:57We'll see you again next Friday with more economic analysis and insights.
29:00Here's to a productive week ahead.
29:16We'll see you again next Friday.
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