The Likely Impact of Trump’s Tariffs on Ordinary Citizens

The Likely Impact of Trump’s Tariffs on Ordinary Citizens

PSM STATEMENT: 17 JULY 2025 – THE LIKELY IMPACT OF TRUMP’S TARIFFS ON ORDINARY CITIZENS

Though the dust hasn’t fully settled, it appears that Trump is going to proceed with his plans to put tariffs on almost all imports into the United States. This is definitely going to impact the global economy. We need to be prepared for the economic challenges that ensue.

America’s import totaled USD 3.4 trillion in 2024[1]. Given the US GDP of USD 29.2 trillion[1], imports were 11.6% of US GDP by value. Trump has said that he wants US producers to produce more of the goods that are currently being imported. But that, obviously, cannot occur overnight. So, these goods will still have to be imported, but perhaps from a country with a slightly lower tariff.

The impact of these tariffs on the US population would be a higher retail price for imported goods, as the importing firms and retail outlets will try to pass as much of the increase in prices to the US consumers. In the case of non-essential goods, which have a more elastic[2] price-demand curve, the US importers and the retail businesses in the US might absorb some of the increase in prices.

The tariffs collected by US Customs will go to government coffers. The income of US households will not be augmented in any way because of these tariff collections. On the contrary, the real purchasing power of US households will decrease by about 10% to 20% because the prices of goods have increased. This decrease in real[3] buying power will depress the demand for goods and services produced in the US and tend to push the US economy into a recession. The increase in the cost of living is likely to increase the level of unhappiness in the US public.

Countries exporting to the US will also face recessionary pressures as the US market for their goods shrinks as a result of the decline in real buying power of the US population. The countries punished with higher tariffs might see their exports being substituted by relatively cheaper goods produced by countries that have been prescribed lower tariffs. The countries with the higher US tariff would therefore face stronger recessionary pressures.

Global exports of goods were USD 25 trillion[4] in 2024. US imports of goods are equivalent to about 13.6% of total export value of goods in the world. This is significant, and taking into account the existing over-capacity in multiple sectors – housing, construction, iron and steel, several commodities etc – this additional downward pressure is likely to push the global economy into a downward spiral, which as usual, will affect the bottom 20% of the population in all countries most adversely, as they are the least likely to have savings or be enrolled in social protection schemes.

If a recession unfolds, it probably will occur about a 1 year from now, as it takes time for the negative multiplier effects[5] to kick in. That gives us sufficient time to plan carefully how we in Malaysia can manage this downturn. As the PSM stressed during the Covid induced lockdowns in 2020-2021, one of the primary policy goals should be to ensure that no Malaysian is deprived of basic needs – food, housing, health care and education. We have more than enough resources to ensure that. But we need to work on a good contingency plan.

The PSM calls on the Madani government to take the possibility of a global recession seriously and start working on a contingency plan to deal with it.

Released by,
Jeyakumar Devaraj
Chairperson
Parti Sosialis Malaysia

Notes

  1. https://tradingeconomics.com/united-states/gdp
  2. Elasticity of prices refers to the impact of prices on the effective demand for particular goods. Essential goods tend to have inelastic demand. In other words, people will have to buy them even though they are more expensive. Basic food products and medicines fall in this category.
  3. Real buying power is the actual buying power after taking into account inflation.
  4. UNCTAD figures. Trade in services accounted for about USD 7 trillion.
  5. Multiplier effects refers to the knock-on effects of an economic event. For example, the reduction of total income received by the factory workers in a country due to loss of overtime (due to reduction of exports to the US) for example, will lead to a decrease in aggregate demand in that economy, which in turn will lead to some lay-offs as well further diminution of overtime, which will further aggravate the decrease in aggregate demand.
MINIMUM WAGE : NOW NOT LATER – For ALL and NO Loophole

MINIMUM WAGE : NOW NOT LATER – For ALL and NO Loophole

We are alarmed with the FMM lobby and the compromise by some Ministers. We call for minimum wage now for all with zero loopholes.

  1. The minimum wage legislation was first introduced in Malaysia because of the failure and the abuse of the market system in determining wages. If Malaysia allowed for market forces to determine wages; if we did not allow for cheap migrant labour to come into the market, then the wages would have been automatically high. it is also the MEF, who have been constantly lobbying the Government to get more foreign workers as it goes hand in hand into their cheap labour policies. Because of this manipulation of the market forces, the Employers should not complain when minimum wages are increased time to time.
  2. The date told by the Prime Minister 1 May 2022 should be date of implementation and there should be no further delay. Simply because the actual date of implementation should have been either January 2021 or February 2022 because the last increase of minimum wage January 2019 for RM 1100 and February 2020 was only for 57 township. So historically because of the delay of implementation of minimum wage , workers have lost a total of 28 months of backdated wages. Who is going to compensate them.
    January 2013 – RM 900
    (all companies given 12 months – 12 months delay)
    (18 months)
    July 2016 – RM 1000
    (6 months)
    January 2019 – RM 1100
    February 2020 – RM 1200
    (4 months)
    May 2022 – RM 1500
  3. The Minimum wage of RM 1500 is not a massive hike
    • MTUC, Cuepacs have been demanding for RM 1800
    • Both the Coalition BN and PH have already promised RM 1500 within a term
    • Bank Negara Estimate for Living wage in KL in 2016. Now would be higher is Single adult RM 2,700, for a couple RM 4500 and a family of 2 children RM 6,500.
    • Using the Government formula – Technical Committee on wage which take into account poverty line, CPI, production growth and Unemployment, then Minimum wage in Malaysia should be RM 2017.
    • In the region, Malaysia workers purchasing power with the minimum wage is the
      lowest in ASEAN because workers in Malaysia only get 12.62% (10.45% in 2018)
      of purchasing power compared to per capita income.
  4. Another alarming fact is that Entrepreneur Development and Cooperatives Minister Tan Sri Noh Omar announced that the small and medium-sized enterprises (SMEs) will be exempted from applying the RM1,500 minimum wage rate from May 1. This was told in Dewan Rakyat. Who is Noh Omar to make such an exemption? The powers to do so is only in the hands of the Human Resource Minister who has previously given such exemption based on case to case situation. We hope proper assessment is made because we are in an opinion based on previous minimum wage hike, it didn’t impact on the SME even though FMM use the same arguments
  5. PSM calls for implementation and the Government should help out companies who are unable to meet the minimum wage. The strategy should have been to tax the very rich individual and companies and cross subsidize the SMEs who needs help. In our scenario today, MEF will oppose all sorts of tax like wealth tax, capital gain tax etc including setting a ceiling for high wages and at the same time their only strategy is to ensure and suppress wages and ensure workers of the lowest paid are kept low. So increasing minimum wage below is not really the issue but readjusting wages and income from above is the solution.
    There are many ways to Government can help these few companies are facing hardship. The Government must able to redeploy and retrain. We propose to increase tax and assist companies after only assessment is made using the below method. The Government can Increase corporate tax gradually 1% per year till reach 30%, 1 to 5% wealth tax of any wealth exceeding RM 10million for example.
  6. There should be act to control the ceiling price of wages. Malaysia GINI coefficient is the second highest in South East Asia. Even our GLCs CEO some of them easily earn more than 100k a month
  7. Recently the Government’s reckless move in allowing several rounds of EPF withdrawals via i-Lestari, i-Sinar and i-Citra schemes have resulted in a total withdrawal of RM101 billion through 7.4 million members. This according to EPF has resulted in 6.1 million members having less than RM10,000 in their savings and 79% of them having less than RM1,000 left consequently. By increasing the minimum wage RM 300 perhaps in just a small way for the Government to assist these works to built up their savings through EPF 

S. Arutchelvan
PSM Deputy Chairperson