US Tariffs Pose Serious Threat to Malaysian Steel Industry: MISIF Urges Swift Government Response
The recent imposition of a 25% tariff on steel and aluminum imports by the United States has sent shockwaves through global trade, and the Malaysian steel industry is bracing for significant challenges. The Malaysian Iron and Steel Industry Federation has raised alarms about a potential surge in dumped steel products entering Malaysia, which could severely disrupt the local market and damage the industry’s competitiveness.
The Impact of US Tariffs: Trade Diversion Risks
The tariffs, announced by US President Donald Trump, will apply a flat 25% duty on steel and aluminum imports, removing previous exceptions and product-specific exclusions. This decision is expected to trigger a shift in global trade flows, as countries affected by the tariffs, such as China, Japan, South Korea, Brazil, and Vietnam, look for alternative markets to absorb their excess steel production.
The key concern for Malaysia is the possibility of becoming a destination for steel products previously exported to the US under exemption agreements. Countries like China, Japan, South Korea, and Vietnam, which had enjoyed tariff exemptions or quota deals for their steel exports to the US, will now need to find new markets. The Malaysian government’s free trade agreements with countries like Vietnam and Japan make Malaysia an attractive target for these diverted exports.
MISIF, which represents over 150 steel companies in Malaysia, warns that without immediate action, Malaysia could face an influx of unfairly priced steel, undermining local manufacturers. The group emphasized that this could lead to a collapse in local prices, plant closures, significant job losses, and ultimately a weakened industrial base.
Global Trade Shifts and Malaysia’s Vulnerability
The US tariffs are expected to exacerbate the trade diversion phenomenon. For years, countries like China have circumvented tariffs through various means, such as rerouting steel exports through nations like Canada, Mexico, Brazil, and Vietnam. The US has taken measures to prevent this practice, including imposing tariffs on countries that were used as conduits for Chinese steel. However, these attempts have failed to completely halt the flow of excess steel, leading to a steady increase in global steel trade imbalances.
The volume of steel exports from countries like China may be smaller, but the global supply chain’s response to the US tariffs could prompt a sharp rise in steel imports to Malaysia. With Malaysia’s free trade agreements in place with key exporters like Vietnam and Japan, the country may soon become the preferred destination for these diverted products. The increased competition from cheap imports could hurt the profitability and survival of local steelmakers.
Efforts to Address Unfair Trade Practices
In response to these threats, the Malaysian Ministry of Investment, Trade, and Industry (Miti) has already taken some steps to investigate potential dumping practices. Last week, the ministry launched a probe into the alleged dumping of flat-rolled steel products from China, South Korea, and Vietnam. This follows a recent expansion of anti-dumping duties on certain steel wires from China.
Malaysia is not alone in its efforts to curb unfair trade practices. Other countries in the region, such as Vietnam, have already imposed anti-dumping duties on Chinese products, while Indonesia has also acted against certain iron products. However, despite these measures, MISIF warns that if Malaysia’s anti-dumping enforcement is not bolstered, domestic producers may still face significant risks.
The Call for Immediate Action
MISIF has strongly urged the Malaysian government to take swift and decisive action to protect the local steel industry. The trade group advocates for the reinforcement of anti-dumping legislation and the acceleration of investigations into unfair trade practices. Furthermore, MISIF has called on the government to implement effective measures to shield local manufacturers from unfair competition and prevent the detrimental impact of a flood of low-priced imports.
Failure to address these concerns, MISIF argues, will result in lasting damage to Malaysia’s steel industry. The group highlighted that without fair trade practices, Malaysian steel producers could be displaced by imported products priced unfairly due to subsidization or other trade-distorting factors. This could lead to plant closures, the loss of thousands of jobs, and a significant weakening of Malaysia’s industrial base.
Looking Ahead: The Need for Proactive Measures
As the global steel market adjusts to the new tariffs imposed by the US, Malaysia must remain vigilant and proactive in managing the influx of imports. Strengthening anti-dumping measures and ensuring fair trade practices will be crucial to safeguarding the long-term health of the local steel industry. In the face of a changing global trade landscape, Malaysia must balance international trade relationships with the need to protect domestic manufacturing capabilities.
