Trump's tariff defeat is Malaysia's wake-up call

Joseph Masilamany

A US Supreme Court’s 6-3 ruling to strike down President Donald Trump’s sweeping tariff strategy may look like an American constitutional drama. It is not.

For countries like Malaysia, deeply wired into global supply chains and dependent on export stability, it is a warning signal.

The court found that Trump had overreached by relying on emergency executive powers to impose broad tariffs – that trade authority rests primarily with Congress. One thing is now plain: American trade policy may well be fought as much in courtrooms as in negotiating rooms.

That uncertainty matters for Kuala Lumpur.

Trade volatility is Malaysia’s risk

Malaysia is not a peripheral player in global trade. It is a semiconductor powerhouse, a critical node in the electrical and electronics ecosystem, and a major exporter to both the US and China.

The US is among Malaysia’s top trading partners. Semiconductors account for a substantial portion of exports to the American market. These are not abstract figures – they represent factories in Penang, engineers in Kulim, and thousands of skilled jobs tied to stable cross-border demand.

If Washington’s tariff regime remains legally unstable, businesses face a new layer of unpredictability. Investors do not fear high tariffs as much as they fear changing tariffs.

Courts have now curbed the executive’s ability to impose sweeping trade measures, which means future tariff policies may need congressional approval, slowing sudden shifts. That could bring stability in the long run.

But in the short term, appeals, reversals and political manoeuvring could inject fresh uncertainty into global markets.

Malaysia must prepare for both scenarios.

The semiconductor dilemma

The US-China rivalry is increasingly centred on semiconductor dominance.

Malaysia sits quietly but strategically in the middle of that contest.

While Malaysia is not the direct target of Trump-era tariffs in the way China was, it risks becoming collateral damage. US policymakers are wary of “rerouting” – goods manufactured in China but re-exported through Asean to avoid tariffs.

The International Emergency Economic Powers Act tariffs may be dead, but Trump has vowed to reimpose duties through other legal authorities. Section 232 tariffs on steel, aluminium and vehicles remain in force. Targeted measures could shift toward stricter supply chain enforcement rather than blanket duties – and that puts countries like Malaysia under scrutiny.

Prime Minister Anwar Ibrahim’s administration must therefore ensure that Malaysia is not perceived as a backdoor for sanctioned goods. Transparency, compliance and sustained diplomatic engagement with Washington will be essential.

In trade politics, perception often shapes policy.

Palm oil and the ripple effect

Palm oil and other commodities are less directly caught up in US-China tariff battles. But global trade wars affect currency strength, shipping flows and demand cycles.

If tariffs escalate again, China may pivot even more aggressively toward Asean markets. That could benefit Malaysian exports in the short term. Yet it also deepens strategic dependence on Beijing at a time when Malaysia is trying to keep its relationships balanced.

If the court rulings hold and tariff pressure eases, global trade flows may stabilise. That suits a mid-sized economy like Malaysia far better than volatility does.

Malaysia does not thrive on trade wars but on predictable rules.

The political heat on Anwar

Why, then, is the heat on Anwar? Because Malaysia’s foreign and economic policy rests on a careful balancing act.

Anwar has positioned Malaysia as open to US investment, deeply engaged with China, committed to Asean centrality, exploring Brics cooperation and championing Global South solidarity.

Now that American tariff authority has been legally constrained, critics may argue that Malaysia over-calibrated its strategy around an unstable US posture. If tariffs return under alternative legal authorities, opposition voices will say the government was caught flat-footed.

Either way, Anwar must show he is anticipating, not reacting. Economic uncertainty quickly becomes political ammunition.

Internal US battle, global consequences

What is unfolding in the US is not merely about trade. It is about the limits of presidential power.

The Supreme Court’s ruling makes clear that emergency economic powers cannot be used indefinitely as a substitute for congressional authority. How future presidents deploy tariffs will never quite be the same.

For Malaysia, the deeper issue is this: when superpowers experience institutional friction, middle economies absorb the shockwaves.

A legally contested tariff regime breeds market hesitation, investment pauses, supply chain recalculations and currency fluctuations. Even if Malaysia is not directly targeted, it operates within a global system shaped by US decisions.

The lesson of volatility

Trump has vowed to pursue tariffs through alternative authorities, so his trade strategy may yet survive in modified form. Or the legal battles could trigger a deeper constitutional reckoning over how America wields economic power.

But one thing is already clear: the age of predictable globalisation is over.

Trade is no longer merely about comparative advantage. It is about leverage, about strategic containment and, increasingly, about law.

When tariffs can be imposed by executive action and dismantled by judicial review, supply chains become political instruments. Markets become arenas of legal contest. Investment decisions hinge not only on demand and cost, but on what judges in Washington decide.

That volatility does not stay in America. It ripples outward into factories in Penang, technology parks in Kulim, commodity ports in Johor, and boardrooms weighing expansion plans. Middle economies like Malaysia absorb uncertainty created elsewhere.

This is the terrain Anwar must navigate. Malaysia cannot anchor its future to the assumption that superpowers will act consistently. Nor can it drift passively between Washington and Beijing, hoping tensions ease on their own.

Strategic neutrality must be matched by strategic preparation. Diversification must accelerate. The semiconductor ecosystem must move up the value chain. Engagement must extend beyond the White House to the US Congress, where trade authority may ultimately rest.

And Malaysia must guard against being seen as a conduit in great-power rivalry.

Anwar does not control America’s courts or its politics. But he does control how prepared Malaysia is for the consequences.

When superpowers argue in court, smaller nations do not get a vote. Instead, they get shockwaves.

Preparedness is the only sovereignty that endures.

Joseph Masilamany is a veteran journalist who writes widely on governance, faith, culture and the moral questions shaping Malaysian public life. His work often explores the relationship between institutions, conscience and the human spirit.

...