The decision by the Supreme Court of the United States to overturn the implementation of tariffs under the International Emergency Economic Powers Act (IEEPA) on February 20 has offered a measure of relief to Malaysian exporters, particularly in reducing policy uncertainty surrounding United States trade measures.
However, a newly announced 15 per cent global tariff introduced under the administration of President Donald Trump remains legally valid for the time being. This means the US government can continue collecting duties on goods entering its market, including products from Malaysia.
How The Tariffs Work
Technically, US tariffs are taxes imposed on importers in the United States, who are required to pay the levy to their government. In practice, the added cost of imports is often passed on to American consumers through higher prices.
According to BIMB Securities Research, the 15 per cent global tariff is enforced under Section 122 of the Trade Act of 1974, which allows the US president to impose tariffs of up to 15 per cent for a maximum of 150 days without Congressional approval.
For Malaysia, this development raises important questions about the Reciprocal Tariff Agreement (ART) signed last year.
“If the previously announced 19 per cent reciprocal tariff on Malaysia is replaced by the uniform 15 per cent global tariff under Section 122, Malaysia would effectively face a lower rate, at least during the 150-day period,” the research house said in a note.
Limited Relief For Exporters
Senior Lecturer at Universiti Teknologi MARA (UiTM), Dr Mohamad Idham Md Razak, said that previously, tariffs could be imposed broadly on the grounds of economic emergency, making it difficult for companies to plan their export costs and pricing strategies.
With the court’s decision, he said, the risk of sudden and sweeping tariff measures has been reduced, helping to stabilise trade expectations.
Nevertheless, Dr Mohamad Idham cautioned that the positive impact is partially offset by the introduction of the new global tariff, as export costs to the US will still rise.
“From a competitiveness standpoint, Malaysian products may remain competitive if key rivals are subject to the same tariff rate. However, exporters’ profit margins are likely to narrow in the short term,” he told BH.
He added that the 15 per cent tariff could be seen as relatively lighter compared to the earlier proposed 19 per cent reciprocal tariff, meaning Malaysia is in a better position than under a more severe scenario.
Among the sectors likely to benefit are electrical and electronics (E&E), semiconductor components, rubber gloves, as well as timber and furniture products, given their heavy reliance on the US market.
“If tariffs are applied uniformly across many countries, US buyers are likely to retain suppliers with stable supply chains and consistent quality, such as Malaysia. In this context, the impact will be more about price adjustments and operational efficiency rather than an abrupt loss of market share,” he said.
Addressing Trade Deficit Concerns
Chief Economist of Bank Muamalat Malaysia Berhad, Dr Mohd Afzanizam Abdul Rashid, explained that US import tariffs are taxes paid by American importers to their own government.
He noted that the Trump administration’s stance was that a trade deficit — where imports exceed exports — was unfair, as the US was perceived to be purchasing more from other countries than it was selling abroad.
As such, the import tariffs were intended to curb imports and reduce the trade deficit.
However, Dr Mohd Afzanizam said the US Supreme Court ruled that the president had exceeded his authority in implementing the tariffs under IEEPA.
“With the decision overturned, businesses are no longer required to pay those tariffs. In fact, they are expected to receive refunds for duties previously paid.
“This is a positive development as it reduces business costs and provides a financial boost through the reimbursement of earlier payments,” he said.
At the same time, he warned that the Trump administration may rely on alternative legal provisions to pursue its policy objectives, suggesting that ongoing tariff-related developments could continue to unfold.
Previously, Prime Minister Anwar Ibrahim said initial explanations had been provided by Investment, Trade and Industry Minister Johari Abdul Ghani, and that the matter would be further reviewed at the upcoming Cabinet meeting on Friday.
