THE world bore witness to a “market capitulation” of historic proportions – a swift, healthy and at the same time punishing correction in equity markets across the globe, triggered by the spectre of an economic slowdown stoked by US trade policy.
Markets reeled under the weight of blanket tariffs, with risk-off sentiment cascading through exchanges from New York to Tokyo.
Social media erupted with calls to reverse course, but the selloff was already well underway.
Within hours, US equity indices saw trillions wiped off in market capitalisation.
The Dow Jones Industrial Average plummeted from 42,225 to 36,645 on April 8.
The S&P 500 retreated from 5,670 to 4,982. The Nasdaq Composite followed suit, diving from 17,601 to 15,267.
These were not ordinary declines – they were seismic moves that reignited comparisons to Black Monday.
But curiously, it wasn’t the erosion of equity wealth that prompted the White House to act.
Despite the administration’s recent pivot to “main street-first” rhetoric, signalling a departure from the Wall Street-centric playbook of the past 40 years, the more immediate catalyst for action was in the BOND MARKET.
Yields on long-dated Treasuries surged as investors offloaded US debt.
The 30-year Treasury yield hit 5 per cent – a psychological and economic threshold that forced Washington to recalibrate.
The sharp rise in yields posed a direct threat to the broader economy.
Higher borrowing costs would not only dampen credit-fuelled consumption and investment, but also potentially jeopardise the refinancing of the US$9.2 trillion in debt maturing this year.
The move also imperilled mortgage, auto, and corporate lending, placing additional strain on a still-vulnerable economy.
Facing mounting pressure, US President Donald Trump announced a 90-day suspension of the reciprocal tariff policy – exempting all but China from the 10 per cent blanket levy.
Markets rallied in relief, but the broader implications of this volteface are far more enduring.
(And therein lies the irony: by deliberately shaking investor confidence, Trump may be engineering the very capital reallocation that tariffs alone could not deliver.
This was the core thesis of a research note I wrote yesterday, Not All That Falls Is Failing.)
IMPLICATIONS FOR MALAYSIA
For Malaysia, the 90-day reprieve presents a critical window to engage Washington on both tariff and non-tariff barriers.
But expectations must be tempered – US trade policy is no longer being shaped solely by macroeconomic rationale or WTO norms.
It is increasingly driven by domestic politics, fiscal gaps and geopolitical leverage.
The tariff imposed on Malaysia appears to reflect our trade surplus with the US, rather than the absolute size of our exports.
Our surplus stood at USD24.8 billion in 2024, and unless offset through broader bilateral trade recalibrations – such as increased purchases of US goods – Malaysia may continue to find itself in Washington’s crosshairs.
But tariffs are only part of the equation.
The US has raised concerns over Malaysia’s non-tariff barriers in key sectors: automotive imports, halal food certification, government procurement, financial services, Bumiputera policy, and foreign ownership rules.
In this new climate, longstanding domestic protections may be interpreted as obstacles to “reciprocal access” – a term that now underpins US trade strategy.
Then there’s the energy angle.
The US is now the world’s largest producer of oil and natural gas.
Trump’s directive to the EU to buy American hydrocarbons to narrow trade imbalances will inevitably ripple across Asia.
Already, Thailand, Indonesia, Japan, Taiwan, the Philippines and South Korea have signalled willingness to pivot toward US LNG.
For Malaysia, this could mean market share erosion and pressure on our USD45-50 billion oil and gas export earnings.
In my view, Malaysia could narrow the surplus by increasing defence procurement – Boeing aircraft being the most obvious option – but such moves must be weighed carefully against strategic autonomy and fiscal priorities.
THE BIGGER PICTURE
Ultimately, the underlying motivation for the US tariff regime is to backfill the fiscal shortfall arising from proposed tax cuts for Americans earning under USD150,000 annually.
Trade policy is no longer just a diplomatic lever. It’s being deployed as a private sector-generating mechanism – a radical policy toward a more assertive, market-driven form of capitalism.
For global markets, this signals a reordering of economic fundamentals.
Even political incorrectness, long seen as a reputational risk, has been rebranded as strategic candour.
In this world, bluntness is not a bug – it’s the feature.
Trade surpluses are now liabilities, not achievements.
And multilateralism is being replaced by transactional bilateralism.
The question for Malaysia is no longer whether the rules of the game are changing – they already have.
The real question is: Are we ready to play by these new rules, and on what terms?
The views expressed here are those of the columnist and do not necessarily represent the views of Sarawak Tribune. The writer can be reached at med.akilis@gmail. com
