Donald Trump's administration slapped Malaysia with a 24% export tariff and additional tariff for solar panels. The argument he has been paddling is countries with surplus merchandise trade .... repeat again merchandise trade have been cheating the US and ripping them off.
Malaysia's merchandise trade surplus against the US was US$24.8 billion for 2024. However, the missing part of the full trade equation is the services trade.
US government do not release any official data detailing the services side of trade balance. As an indication, Malaysia's invisible trade deficit has improved to RM13.9 for 2024, but the year earlier in 2023, the deficit was RM43.2 billion.
The US is the leading exporter of services globally with total services exports reaching approximately $1.1 trillion in 2024. It is obviously in favour of the US. If having a surplus is a sin, then who is cheating and ripping-off who?
Taken from University of Malaya's Asia-Europe Institute website, below:
Why America Excludes Sales, Services From Its Trade Deficits: Strategic Blind Spot In Asia
KUALA LUMPUR, April 19 (Bernama) -- In the calculus of international trade, perception is power. Nowhere is this more evident than in the way the United States (US) calculates and presents its trade deficit.
Since the 1980s, successive American administrations have focused almost exclusively on merchandise trade -- exports and imports of tangible goods -- while quietly downplaying, if not outright excluding, the significant surplus the US enjoys in services and sales, especially in the Asia-Pacific region.
This selective accounting distorts the real economic balance, particularly with countries like Malaysia, and fuels false anxieties about the American decline.
More dangerously, it legitimises punitive tariffs and aggressive rhetoric that harm multilateral trade and undermine ASEAN’s regional stability. The omission of services is not merely a technical quirk -- it is a strategic blind spot with geopolitical consequences.
America's Service Economy: Invisible in Trade Narratives
The US economy is fundamentally service-based. As of 2025, services constitute over 77 per cent of the American gross domestic product (GDP).
This includes high-margin sectors like finance, insurance, intellectual property licensing, legal consulting, digital platforms, and education.
American firms like Google, Microsoft, Meta, and Netflix generate billions in digital service revenues abroad -- revenues which often go untaxed, untracked, or underreported in bilateral trade statistics.
Take Malaysia, for example. While the US routinely posts a goods trade deficit with Malaysia -- largely due to electronics, palm oil derivatives, and rubber products -- it enjoys a substantial and growing surplus in services.
American universities recruit Malaysian students. US technology (tech) firms earn from advertising, cloud storage, and software subscriptions.
Professional services, legal advisories, management consulting, and intellectual property (IP) royalties further tip the scale. Yet none of this is properly counted when the US complains of being “cheated” by Malaysia or ASEAN countries.
The Political Utility of Exclusion
Why does the US exclude services? The answer is partly political. Trade deficits, when measured only in goods, make for easy headlines.
They provide ammunition for nationalist agendas, especially under administrations like Donald Trump’s, which equate trade deficits with economic weakness or strategic failure.
In this distorted view, countries like China, Vietnam, and Malaysia appear as villains running surpluses at America’s expense. But if services were included, the picture would change dramatically.
The US runs a global surplus in services -- nearly US$300 billion in 2024 (US$1=RM4.41). Its surplus with Asia is even more pronounced in sectors like cloud computing, e-commerce logistics, financial technology, and software-as-a-service (SaaS).
Including these would undercut the very rationale for tariffs, sanctions, and supply chain decoupling policies aimed at the Asian economies.
Impact on Malaysia and ASEAN
For Malaysia, the implications are significant. Malaysia’s trade with the US is heavily scrutinised in goods: semiconductors, refined petroleum, furniture, and rubber gloves.
But it is the intangible economy -- where American capital and IP dominate -- that increasingly drives bilateral flows. By excluding services, the US creates a false perception of imbalance that justifies unfair policies.
Moreover, the exclusion undermines ASEAN’s broader economic diplomacy. The bloc has embraced digital trade, e-commerce, and regional connectivity under the ASEAN Digital Masterplan 2025.
By refusing to account for the services surplus, Washington perpetuates outdated trade assumptions, ignoring how value is now added not just in factories, but in data centres, virtual classrooms, and financial technology (fintech) platforms.
This limits ASEAN’s ability to engage with the US in forward-looking trade frameworks, like the Indo-Pacific Economic Framework for Prosperity (IPEF), which ironically focuses on digital trade.
Strategic Consequences in a Fractured Global Order
The omission of services also reveals deeper contradictions in the American hegemony. On one hand, the US demands that Asia respect intellectual property rights, open up digital markets, and align with Western data governance norms.
On the other hand, it refuses to transparently account for its own dominance in these very sectors. This undermines trust and corrodes the legitimacy of American leadership in the region.
It also creates asymmetrical pressure on ASEAN states, especially mid-sized economies like Malaysia.
With no ability to retaliate in the digital domain -- where US firms enjoy near-total market control -- ASEAN states find themselves squeezed between the American digital dominance and China’s manufacturing scale. The exclusion of services also leads to flawed strategic assessments.
When US policymakers believe they are in economic decline based on skewed statistics, they overreact -- imposing tariffs, reshoring industries, and pressing allies to decouple from China.
This distorts global trade flows and puts ASEAN in an uncomfortable position of having to choose sides, despite its non-aligned ethos.
Conclusion: Towards a More Honest Trade Dialogue
As Malaysia deepens its economic diplomacy under Prime Minister Datuk Seri Anwar Ibrahim -- seeking balanced ties with both Washington and Beijing -- it must call out the selective nature of America’s trade accounting.
A real partnership requires honesty, especially in a post-pandemic world where services and digital flows define economic power.
The US must modernise its trade narratives to reflect its real strengths. By continuing to exclude services, it not only misreads its position but risks alienating the very partners it needs in Asia.
In the end, America's trade deficit is less a reflection of weakness than a failure to count what truly counts.
-- BERNAMA
Phar Kim Beng, PhD, is professor of ASEAN studies at Islamic International University Malaysia (IIUM) and Senior Research Fellow, Asia-Europe Institute, Universiti Malaya.
Article was first published in BERNAMA on 19 April 2025.
Malaysia avoided from imposing a reciprocal tariff against the US for the 24% imposed on Malaysia. Trump could get nasty in the manner he upped the number against China. According to Tengku Zafrul, the American claim of Malaysia imposing import tariff of 47% on US product is false. The actual average tariff applied to US imports into Malaysia is 5.6%.
Malaysia will be meeting their US counterpart to negotiate. It will be led by the Deputy Secretary General, Mastura Ahmad Mustafa as Chief Negotiator. The US is targeting the merchandise trade surplus. Perhaps, Mastura need to highlight the US surplus in term of services.
The ballpark figure is conservatively estimated at US$2.5 to US$3.5 billon. However, the figure could be larger should the quantum through investment services, insurance, tech, software, consulting, entertainment, media, IP, and education be ascertained.
To tariff services, it is not straightforward. Services does not cross borders in crates or containers. Perhaps the reciprocal option available in the use of non-tariff barriers, regulatory measures, localisation policies, domestic alternative education, and Digital Services Taxes.
Should more countries raise this issue, it could push back the MAGAs. They cannot presume they could bully everyone without a retaliation.
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