Posted on 13 Mar 2026
The administration of US President Donald Trump has launched a probe into Malaysia on alleged excess manufacturing capacity in the electronics, machinery and steel sectors in an effort to reinstate tariffs struck down by the US Supreme Court.
According to a United States Trade Representative (USTR) document, it initiated investigations under Section 301 on March 11, 2026. The section empowers the USTR to investigate and retaliate against unfair foreign acts that restrict US trade.
The USTR said evidence of structural excess capacity and production exists for Malaysia through its large or persistent goods trade surpluses.
Citing 2024 figures, the USTR document said Malaysia maintained a bilateral goods and services trade surplus with the United States of US$16 billion (RM62.8 billion). Most of this surplus is focused on goods trade, particularly in sectors such as electronics or machinery.
“Evidence suggests that Malaysia has significant excess capacity in its steel sector, which recorded capacity growth of 22% between 2018 and 2022, despite a 25% decline in steel demand during that timeframe,” it also noted.
The USTR said the inter-agency Section 301 committee will hold public hearings and seek public comments as part of investigations.
Once the investigation, which is likely to take months, is completed, the USTR must “determine whether action is appropriate, and if so, what action to take”.
The action comes less than a month after the US Supreme Court ruled on Feb 20 against previous tariffs under the International Emergency Economic Powers Act (IEEPA). These were replaced with a 10% global levy on all foreign goods under Section 122 of the Trade Act 1974. Trump is working on increasing this to 15%.
Malaysia, which announced the US-Malaysia agreement of reciprocal trade last year to secure a 19% tariff, has yet to secure ratification.
Aside from Malaysia, the USTR action also covers China, the EU, Singapore, Switzerland, Norway, Indonesia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India.
“Across numerous sectors, many US trading partners are disregarding market-based policies and producing more goods than they can consume or productively invest domestically,” the USTR said.
“The result of this overproduction is large or persistent trade surpluses, including the expansion of exports to the US or to third countries that, in turn, export to the US. This displaces existing US domestic production or prevents investment and expansion in US manufacturing production that otherwise would have been brought online,” it added.
Affected sectors include aluminium, automobiles, batteries, cement, chemicals, electronics, energy goods, glass, machine tools, machinery, non-ferrous metals, paper, plastics, processed food and beverages, robotics, satellites, semiconductors, ships, solar modules, steel and transportation equipment, according to the USTR.
“In many of these sectors, the US has lost substantial domestic production capacity or has fallen worryingly behind foreign competitors,” it noted.
Source:The Edge
