Malaysia Warns China Against Using It to Avoid US Tariffs

Workers are making solar photovoltaic modules used for small solar panels at a factory in Haian in Jiangsu Province, China, on Jan. 7, 2022. STR/AFP via Getty Images

As businesses worldwide brace for new U.S. tariffs with the incoming administration, Malaysia is telling Chinese companies not to use the country to try to evade duties.

“Over the past year or so ... I have been advising many businesses from China not to invest in Malaysia if they were merely thinking of rebadging their products via Malaysia to avoid U.S. tariffs,” Malaysia’s deputy trade minister, Liew Chin Tong, told a forum on Nov. 2.

U.S. President-elect Donald Trump has previewed a series of new tariffs he may impose as early as day one of his administration, chief among them tariffs on Chinese products. On the campaign trail, Trump said he would impose tariffs as high as 60 percent on Chinese imports. He recently announced an additional 10 percent tariff for the Chinese regime’s role in the fentanyl and illegal immigration crisis. Trump also warned of 25 percent tariffs on imports from Mexico and Canada for those countries’ failure to do their part to govern their borders, leading the heads of state to reach out immediately and negotiate.

Trump issued several tariffs on Chinese imports during his first four years in office, many of which the Biden administration kept and expanded in light of the Chinese regime’s trade violations.

These tariffs have been extended to other countries that function as intermediaries for Chinese companies. The latest, on Nov. 29, affected Malaysia.

An update to a rule instituted in October sets tariffs between 21.31 percent and 271.2 percent on solar panels from Cambodia, Malaysia, Thailand, and Vietnam, many of which are produced by Chinese companies. Trade groups have accused Chinese-owned companies of exploiting Southeast Asian countries to evade tariffs while continuing to dump cheap products on the U.S. market.

China, including its nearby export hubs, accounts for 80 percent of the world’s solar shipments, according to SPV Market Research.

Chinese solar companies have expanded across Southeast Asia, to countries on which the United States has not imposed trade tariffs, such as Laos and Indonesia.

Meanwhile, Chinese-owned companies are reducing their output in countries hit with tariffs.

“It’s a huge cat and mouse game,” said William A. Reinsch, a former trade official in the Clinton administration and senior adviser at the Center for Strategic and International Studies.

“It’s not that hard to move. You set up and you play the game again. The design of the rules is such that the U.S. is usually one step behind.”

Malaysia has also seen Chinese investment in other sectors such as semiconductor assembly, where Malaysia holds a 13 percent share of the global market.

Reuters contributed to this report.