DECEMBER 3 — The 45th US President, Donald Trump, is set to return to the White House as the 47th President following his victory in the recent US presidential election. Countries across Asia including Malaysia, are recalibrating their economic and strategic approaches. With the possibility of significant changes in U.S. policy on trade and security, Malaysia stands at a crossroads. How can the country leverage its strengths to navigate potential disruptions while positioning itself to benefit economically, socially and on the global stage?

Economic challenges and opportunities

Trump’s strong rhetoric and policies targeting China, marked by promises of sweeping tariffs of up to 60% on Chinese imports, have raised alarm bells throughout Asia. For Malaysia, which counts both China and the U.S. as critical trading partners, these developments present a complex scenario. The implications could be significant as the ramifications will affect supply chains, market demand and economic confidence across the region.

Malaysia, with its diverse economic base and strategic location, has opportunities to mitigate potential disruptions and capitalize on new openings. If U.S.-China tensions escalate further into a full-scale trade war, Malaysia could take the opportunity to strengthen its position as an alternative production and trade hub that attracts investments from multinational companies who are looking to diversify away from China. This strategic pivot could strengthen Malaysia’s role in global supply chains and enhance its economic resilience.

Strengthening regional trade and economic partnerships

Malaysia’s proactive participation in regional trade agreements like the RCEP strengthens its economic resilience by reducing reliance on single economies and fostering regional integration. With Malaysia set to chair ASEAN in 2025, it can leverage this leadership to diversify trade beyond the U.S.-China dynamic.

In October 2024, Malaysia joined BRICS as a partner alongside Thailand and Indonesia, signaling a strategic expansion in global alliances and reinforcing its independent, non-aligned stance. Prime Minister Anwar Ibrahim views BRICS as a platform for “economic opportunities free from external pressures,” aligning Malaysia with the “Global South” for greater resilience amid geopolitical shifts. Malaysia’s strategic location along the Straits of Malacca, a vital energy route, complements BRICS’ significant share in global oil production. As an OIC member, Malaysia’s dual alignment with BRICS and Islamic nations broadens its market access, economic stability, and influence in a multipolar world.

Key strengths for economic leverage

Malaysia’s economic strength lies in its diverse sectors, from electronics and palm oil to an expanding focus on tourism. To stay competitive globally, innovation in green energy and digital technology is crucial. As a leader in the halal economy and Islamic finance, Malaysia leverages its ethical finance expertise, backed by Value-Based Intermediation (VBI), to attract investment and promote sustainable growth.

Situated along major shipping routes, Malaysia’s strategic location boosts its potential as a trade and logistics hub. Streamlining customs and trade policies is vital to enhance its appeal as a global trade partner, strengthening its economic resilience, especially amid U.S.-China trade tensions.

The shift toward digital transformation presents Malaysia with an opportunity to lead Southeast Asia’s digital economy. Supporting tech startups and fostering innovation are essential to attract investors. Leveraging these strengths, Malaysia can navigate global uncertainties and secure its place as a key international player.

Social and cultural diplomacy

Malaysia’s diverse cultural fabric is a unique strength that it can emphasize to foster social cohesion and promote itself as an attractive destination for tourism and international cooperation. Highlighting Malaysia’s multicultural society enhances its image as an inclusive and cooperative partner on the global stage, which is particularly valuable in a world increasingly conscious of diversity and intercultural engagement.

Security concerns and regional stability in ASEAN

Trump’s stance on Taiwan has prompted Asian nations, including Malaysia, to reassess security policies and alliances. With Trump’s approach suggesting allies should contribute more to defense, U.S. support dynamics could change. For Malaysia, maintaining South China Sea stability is vital due to its role as a major trade route for ASEAN, where disruptions could impact economies. The South China Sea dispute, involving overlapping claims by China and ASEAN members, remains a delicate issue that could challenge China-ASEAN relations. Malaysia must prioritize ASEAN unity for peace and stability while balancing relations with China.

To navigate these tensions without being drawn into conflicts, Malaysia’s non-alignment and neutrality are essential. Strengthening ASEAN ties allows for a collective stance on security and trade, enhancing regional stability. Concurrently, Malaysia should balance engagements with both China and the U.S., fostering diplomacy that prioritizes peace and shared benefits, ensuring its influence and stability in an uncertain geopolitical landscape.

The road ahead

As the return of Donald Trump to the White House raises questions about U.S. trade and security policies, Malaysia should draw on its strengths to navigate this new landscape. By emphasizing economic diversification, strengthening regional and global partnerships, and promoting innovation and sustainability, Malaysia can position itself not just as a resilient nation but as a leading force in Southeast Asia.

Balancing economic opportunities and geopolitical realities will be essential for Malaysia to thrive amid shifting global dynamics. With strategic foresight and adaptability, Malaysia can turn challenges into opportunities and secure its place as a significant economic and diplomatic player on the world stage. — By Associate Professor Dr. Ashurov Sharofiddin, Assistant Professor Dr. Syed Marwan Mujahid Syed Azman

The authors are from IIUM Institute of Islamic Banking and Finance (IIiBF), and may be reached at [email protected] and [email protected]

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.