The Trump tariffs were struck down by the US Supreme Court last year, but President Trump insisted he had the right to impose tariffs “to defend national sovereignty”. This has raised confusion about how much of a tariff should be paid because it fluctuates like the value of Bitcoin, which is difficult to predict using common sense. Recently, the US has also initiated an investigation into Malaysia over allegations of overcapacity and forced labor.
The Office of the US Trade Representative (USTR) has initiated an investigation under Section 301(b) of the Trade Act of 1974 against Malaysia over alleged overcapacity in sectors such as electronics, machinery, and steel. In addition to Malaysia, China, the European Union, Singapore, South Korea, Vietnam, Japan, and India are also being investigated.
Malaysia has a $16 billion trade surplus with the US, driven by exports of electronics and machinery. According to the US, Malaysia’s steel production capacity will increase by 22% between 2018–2022 despite a 25% drop in demand. This, according to the United States, is an indication of potential excess capacity that will cause steel prices to fall, thus affecting domestic steel production capacity.
The investigation will last for several months with public hearings and comments open until April 15. The USTR will issue a final decision before determining whether to impose retaliatory measures.
At the same time, the United States also initiated an investigation into 60 countries, including Malaysia, regarding alleged failures to address the issue of forced labor under section 301(b) of the Trade Act of 1974. The investigation is being conducted to see whether the goods produced involve forced labor to the extent that it affects American trade. The use of forced labor is seen as a way to reduce unfair production costs because it cannot compete with American companies.
In addition to Malaysia, other countries under investigation are Saudi Arabia, Brazil, China, the Philippines, India, Indonesia, Cambodia, the European Union, Singapore, Thailand, and Vietnam. The United States has requested consultations with the governments of the countries involved and a hearing is scheduled for April 28.
If found guilty, the United States will impose trade restrictions, new tariffs and import quotas. The investigation announced yesterday is seen as a reason for the United States to reimpose higher tariffs on a par with the Trump Tariff. At present, the global tariff is only 15%, which is much lower than the 19% imposed on Malaysia through the Trump Tariff.
