Tariffs, Duties & the Drive Towards Global Competitiveness

On April 2, Donald Trump shocked global markets by imposing sweeping tariffs on imported goods, calling it “Liberation Day.” The move, aimed at reviving domestic car manufacturing, is expected to do the opposite - hurting consumer choice, inflating prices, and slashing carmakers’ profits.

But as much of the world scrambles to respond, Malaysia faces a similar reckoning of its own making.

Later this year, Malaysia will remove the import and excise duty exemptions on CBU electric vehicles (EVs). This shift is likely to mirror the fallout in the United States, where new levies have already prompted predictions of collapsing vehicle sales and production slowdowns.

EV imports into Malaysia, which had surged under the tax-free window, are poised to shrink significantly. What’s worse, there’s no clear, long-term plan to attract global brands to invest in local CKD (completely knocked-down) assembly beyond the current 2027 exemption deadline.

The absence of a robust EV industrial policy risks making Malaysia an unattractive destination for carmakers. Without clear incentives and infrastructure to support CKD manufacturing or localisation, automakers will think twice before betting on Malaysia as a serious production hub.

What we're seeing now is the tail end of a tax holiday prompting a sales surge, not the beginning of a sustainable transition.

Trump’s tariff shockwave has had ripple effects worldwide, and it’s forcing countries to reevaluate their automotive strategies. Perhaps it’s time Malaysia did the same. If we continue relying on protectionism and short-term incentives, we risk falling behind in a region that’s becoming increasingly competitive in EV manufacturing and investment.

Countries like Thailand and Indonesia are pulling ahead, offering clear roadmaps and policies to support long-term growth in green mobility.

Without decisive reforms, Malaysia's auto industry could remain stuck - vulnerable to external shocks, and unattractive for real investment. Rebuilding our local industry doesn’t have to mean shielding it from competition.

Instead, it should mean creating the conditions for it to thrive: consistent policies, investment in skills and infrastructure, and a clear path for automakers to localise production in a way that makes economic sense.

And while we’re at it, why not push for greater transparency and accountability in the auto industry? Moving forward, car brands could be mandated to disclose the exact import and excise duties paid on each vehicle - similar to the import documentation that grey market vehicle buyers receive.

If we expect consumers to make informed choices, isn’t it time we gave them access to the full picture?

If the goal is to create a globally competitive auto industry, then we need to stop using protectionism as a crutch and start using policy as a catalyst. The window to act is closing fast. Let’s not wait for our own “Liberation Day” to realise we missed the EV revolution.

Source: The Economist