KUALA LUMPUR : Former prime minister Tun Dr Mahathir Mohamad has cautioned that the United States’ wide-ranging tariff measures are likely to backfire, inflicting greater harm on its own economy than on its trading partners.
“We often focus on the impact these tariffs have on Malaysia and other trading partners. But the real question is, what happens to the United States?” Dr. Mahathir remarked.
He further pointed out that these higher costs would likely lead to American workers demanding higher wages, which could erode their global competitiveness.
“All goods in the U.S. will become more expensive, leading to higher living costs. Consequently, American workers will demand higher wages, eroding their competitiveness globally,” Dr. Mahathir explained.
The former Prime Minister also highlighted the U.S.’s heavy reliance on global supply chains, particularly for critical components such as microchips, which are largely sourced from countries like South Korea, Taiwan, and Malaysia. Dr. Mahathir warned that the tariffs would increase production costs, making U.S. products less competitive on the world stage.
Aviation Industry at Risk
Dr. Mahathir cited the aviation sector as a prime example of how tariffs could harm the U.S. economy. He suggested that countries like Malaysia could shift their purchases from American-made Boeing aircraft to European Airbus jets in response to the higher costs caused by the tariffs.
“For instance, if we choose to buy 30 Airbus planes instead of Boeing, and each Boeing aircraft costs nearly half a billion ringgit, that would translate into a significant loss for the U.S. economy,” he said.
The broader aviation industry has already begun to feel the strain of tariffs, with Boeing facing rising costs and growing competition from Airbus, particularly in markets where U.S. products have historically held a dominant position.
U.S. Economic Impact and Potential Reversal
Dr. Mahathir also predicted that the U.S. would likely pause its tariff policy in the next few months, acknowledging that the tariffs were inflicting more damage on the U.S. economy than on its trade partners. He stated that this situation had become increasingly untenable for the U.S., as the negative consequences began to outweigh the intended benefits.
Recently, the U.S. announced a 24% tariff on most Malaysian goods, along with a 10% tariff on imports from around 60 countries. However, these measures have been temporarily suspended for 90 days to facilitate further trade negotiations.
Criticism of American Worldview
In addition to his economic concerns, Dr. Mahathir also took aim at the American worldview. He suggested that many Americans, including the U.S. President, often perceive their country as “the world” and remain largely unaware of the complexities of global relations. This ignorance, according to Dr. Mahathir, is partly responsible for the U.S.’s frequent diplomatic conflicts with other nations.
“Even the U.S. President seems unaware of the rest of the world. That’s why he ends up quarrelling with other countries,” Dr. Mahathir remarked.
His comments came in the wake of a controversy involving conservative U.S. commentator Bill O’Reilly, who claimed that Malaysians could not afford to purchase Chinese products. Following a rebuttal by Malaysian Prime Minister Datuk Seri Anwar Ibrahim — in which Anwar described O’Reilly as a “colonialist” — O’Reilly stood by his comments, citing Malaysia’s per capita income of US$5,731, compared to the U.S. figure of US$42,220.
Communications Minister Fahmi Fadzil, however, countered O’Reilly’s assertion, pointing to World Bank figures that show Malaysia’s GDP per capita at US$11,379 in 2023, or US$36,416 when adjusted for purchasing power parity. This firmly places Malaysia in the upper middle-income bracket, contrary to O’Reilly’s claims.
Global Economic Disruption
The debate surrounding U.S. tariffs and global trade dynamics has been a point of concern for economists. Many have warned that these tariffs could lead to higher consumer prices, not just in the U.S., but around the world. The cost of goods such as electronics, clothing, and food could rise, which would disproportionately affect lower-income households in the U.S. (americanprogress.org).
Experts also point out that the U.S. economy’s reliance on international supply chains, especially in high-tech sectors like microchips, makes it vulnerable to disruptions caused by tariffs. Economists believe that increased production costs will negatively impact U.S. businesses’ ability to compete on the global stage, particularly in industries where innovation and efficiency are paramount (ismworld.org).
As Dr. Mahathir suggested, the long-term impact of such trade policies may ultimately prompt the U.S. to reconsider its tariff strategy, especially as the negative economic effects become more apparent.
