Trump tariffs face legal challenge—Malaysia should watch, not flinch

US presidential frontrunner Donald Trump has revived his trademark unilateralism in trade policy, signaling a sweeping return to tariffs—this time on a broader set of countries, including allies. But this posture, while headline-grabbing, rests on shaky legal ground. Malaysia, heavily export-dependent and deeply embedded in global electronics and manufacturing supply chains, has reason to monitor closely. But concern should not evolve into reactive anxiety.

At the core of Trump’s proposal is a legal gambit. His team seeks to reassert presidential power through the International Emergency Economic Powers Act (IEEPA)—a statute designed for true national emergencies, not discretionary tariff escalation. The May ruling in VOS Selections v. United States struck down Trump’s 2020 “Liberation Day” tariffs, stating they exceeded the authority granted under IEEPA. A permanent injunction was issued, though currently stayed pending appeal.

This legal trajectory matters. If the Federal Circuit—or ultimately, the Supreme Court—upholds that decision, it will curtail the executive branch’s ability to use IEEPA for economic maneuvering. Two legal doctrines are in play. First, the nondelegation doctrine, which limits how far Congress can hand legislative powers to the executive. Second, the major questions doctrine, which demands clear congressional authorization for actions with far-reaching economic consequences.

This isn’t just legal nuance—it’s an institutional constraint. What Trump is proposing may never fully materialize, not because of political resistance, but because the legal system may refuse to carry it.

The global response has been uneven—but revealing. European Commission President Ursula von der Leyen stated plainly that she “cannot force European companies to comply” with extraterritorial US tariffs. This isn’t a sign of institutional weakness. It’s a strategic framing move. By asserting European non-enforcement, von der Leyen subtly positions the EU as a defender of multilateral trade norms and casts US actions as coercive.

For Malaysia, this reinforces an important principle: tariffs that are politically motivated and legally ambiguous are not reliable signals of long-term strategic reordering. They are, more often than not, temporary instruments of leverage—economic theater in service of geopolitical pressure points.

Trump’s tariff announcements often coincide with diplomatic flashpoints: tensions with Canada, political crises in Brazil, or flare-ups in the Middle East. This is transactional diplomacy, not trade policy. The tariff becomes a pressure tool, with relief offered only after unrelated concessions are made. It is classic carrot-and-stick logic, where the stick does most of the talking.

Malaysia’s export volumes to the United States reached US$42.3 billion in 2024, a significant share tied to semiconductors, electrical components, and precision engineering. A blanket tariff of 19%—as proposed in Trump’s early campaign materials—would sharply dent margins and potentially impact over 300,000 jobs across Malaysia’s manufacturing ecosystem.

But two constraints temper this risk. First, the legal process is active, and the tariffs may never receive institutional backing. Second, Malaysia is not a targeted actor. Unlike China or Mexico, Malaysia’s inclusion is not strategic—it’s collateral. The signal is generic, not precision-guided.

That matters. Markets read signals differently when intent is ambiguous. If Malaysia were singled out based on security risk, critical material leverage, or direct geopolitical tension, the appropriate response would be more urgent. But this isn’t that. This is broad-spectrum posturing, legally contested and politically timed.

Malaysia’s risk calculus should not be governed by proximity to headlines. It should be anchored in institutional discipline and long-term trade posture. Here’s what that means:

• Don’t mistake volatility for permanence. US trade policy under Trump is volatile by design. It pivots on legal friction, not institutional consensus.
• Stay committed to diversification. The US remains a key partner—but ASEAN, China, the EU, and GCC economies offer deepening demand in semiconductors, green tech, and specialty commodities.
• Double down on rules-based positioning. Malaysia’s value in the global supply chain is not just capacity—it’s credibility. In times of trade fragmentation, neutrality becomes a premium.

In other words, Malaysia must not appear anxious. Markets punish desperation. Global firms reallocate toward reliability. The smartest response to coercive trade signaling is not appeasement. It’s strategic patience.

What Trump has reignited is not a new Bretton Woods. It’s not structural rebalancing or rules-of-origin reform. It’s unilateralism without permanence—governed by mood, challenged by law, and subject to reversal by future administrations or judicial decisions.

Malaysia should continue engaging through ASEAN-led economic coordination, reinforce its foothold in global semiconductors, and deepen partnerships with markets where trade rules—not personal leverage—determine access.

If the US wants to abandon multilateral enforcement in favor of discretionary punishment, it can. But the durability of that approach is legally questionable and geopolitically unstable.

Trump’s tariff rhetoric is loud. But its legal standing is weak. The signal may move headlines, but it won’t restructure trade in ways that last. For Malaysia, the message is clear: Monitor with precision. Respond with calm. Build with intent. Because in global trade, nervous actors lose leverage. Reliable ones gain it.