Malaysia warned on Thursday that any attempt by the incoming Trump administration to impose tariffs on BRICS countries, in retaliation for efforts to create a new currency or move away from the U.S. dollar, could severely disrupt the global semiconductor supply chain. The BRICS bloc, originally comprising Brazil, Russia, India, and China, has since expanded to include other emerging economies. Malaysia, which has applied to join the group, has not yet been officially accepted as a member.
Trade Minister Tengku Zafrul Aziz expressed concern over recent remarks from U.S. President-elect Donald Trump, who stated that BRICS members would face 100% tariffs unless they agreed to abandon any plans to create a new currency or support alternatives to the dollar. Malaysia, which is closely monitoring these developments, highlighted the potential negative impact on both global trade and the semiconductor industry, where U.S. firms are significant investors in the country.
Semiconductor industry at risk
The semiconductor sector is a key part of Malaysia’s economy, with the country serving as a major hub for the testing and packaging of chips. Malaysia accounts for approximately 13% of global semiconductor testing and packaging, which makes it crucial to the global supply chain. With U.S. firms being the primary investors in this industry, any move to impose tariffs on BRICS countries could threaten the stability of this sector, Tengku Zafrul noted.
He emphasised that the U.S. is Malaysia’s third-largest trade partner, and both countries rely on each other for crucial economic and industrial exchanges. “As such, any move to impose a 100% tariff will only harm both parties which are depending on each other for efforts to prevent disruptions in the global supply chain,” the minister said in a parliamentary reply. This stark warning underlined Malaysia’s concern that such tariffs could lead to significant economic repercussions for both the U.S. and Malaysia, particularly in the high-tech and semiconductor sectors.
BRICS and the move away from the dollar
While the BRICS countries have long discussed the idea of reducing reliance on the U.S. dollar in international trade, there has been no official agreement to create a new currency. However, the concept of de-dollarisation has gained momentum in recent years, particularly following the imposition of Western sanctions on Russia in response to the war in Ukraine.
BRICS nations, including Russia and China, have increasingly explored alternative trade mechanisms that do not rely on the dollar. These discussions have intensified as countries look for ways to reduce their dependence on the U.S. currency, which has dominated global trade for decades. Despite this growing interest, no formal steps have been taken to introduce a unified BRICS currency or to completely replace the dollar in trade agreements.
Russia’s response to U.S. dollar influence
Russia has been a vocal critic of U.S. efforts to impose the dollar as the dominant global currency. On Monday, Russian officials stated that any U.S. attempt to force countries to continue using the dollar would backfire and strengthen efforts among BRICS nations to move away from the U.S. currency. Russia’s foreign minister Sergei Lavrov, along with other BRICS representatives, have argued that the push to force countries to rely on the dollar only fosters greater resistance and accelerates the development of alternatives.
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“Trying to compel countries to use the dollar only strengthens the resolve among the BRICS and other nations to explore and adopt national currencies in trade,” a Russian spokesperson said. This sentiment reflects broader concerns in the developing world about the U.S.’s hegemonic influence over the global financial system and the desire for a more diversified currency landscape.
Impact on global trade and relations
The geopolitical and economic dynamics surrounding the U.S. dollar, BRICS, and global trade are now at the forefront of international relations. Malaysia’s response reflects the delicate balance that smaller, open economies must strike between maintaining trade relations with major powers like the U.S. while also navigating the shifting alliances and aspirations of emerging economies.
The discussions surrounding tariffs, de-dollarisation, and the potential creation of a new BRICS currency are part of a broader debate over the future of global trade. With emerging economies like China and Russia taking a stronger stance on reducing their dependence on the dollar, the world may be witnessing the early stages of a shift in the financial order.
As Malaysia closely monitors these developments, it remains to be seen how the incoming U.S. administration will approach its relationship with BRICS countries and how these moves could shape the future of global trade and the semiconductor industry, in particular.
