By Mohd Ammyrul Ashraf Sairan
A comprehensive analysis of the impact on the global economy and the future of Malaysia’s technological landscape
AMIDST the escalating turbulence of the global economy, the tariff policies introduced by US President Donald Trump have exerted a profound and lasting impact on the international trade system. These protectionist measures not only disrupted the flow of goods and commodities but also triggered a domino effect that threatens global economic stability. The looming threat of stagflation, a combination of soaring inflation, sluggish economic growth, and rising unemployment, as warned by Federal Reserve Chair Jerome Powell, is becoming increasingly evident and concerning. Within this context, Malaysia, which is actively pursuing digital economic development and advancing its artificial intelligence (AI) initiatives, faces complex challenges due to its heavy reliance on technological component imports from both economic superpowers.
The technological rivalry between the United States and China has reached unprecedented levels. While the US continues to strengthen its dominance through technology giants such as Google, Microsoft and OpenAI, China has emerged as a formidable competitor, making significant strides in AI, quantum technology, and digital infrastructure. China’s annual investment in research and development (R&D), amounting to approximately USD400 billion, has yielded significant results, marked by the rise of domestic tech giants such as Huawei, Baidu, Alibaba and Tencent on the global stage. The success of China in developing indigenous artificial intelligence (AI) models, such as Baidu’s Ernie and Huawei’s Pangu, which in certain aspects rival and in some cases even surpass, Western technologies, underscores China’s transformation from being merely the “world’s factory” to a burgeoning powerhouse of global innovation.
The impact of Trump’s tariff policy on global supply chains is substantial. Recent data indicate an 18 percent decline in container shipments from China to the United States since April 2024, with projections suggesting a further contraction of up to 37 percent by May. These disruptions in supply chains mirror the oil crisis of the 1970s, which precipitated waves of global inflation. For Malaysia, which is in the process of implementing the National Digital Economy Blueprint (MyDIGITAL), such disruptions present significant challenges, as the majority of essential electronic components and technological hardware are imported from these two nations. The rise in import costs due to tariffs has diminished the competitiveness of local technology firms and hindered the nation’s digital transformation efforts.
From an Islamic perspective, such imbalanced trade policies raise significant concerns. The principles of economic justice and balance in Islamic commercial dealings (muamalah) are clearly undermined by unilateral actions, such as Trump’s tariffs. Prominent Islamic economist, Prof. Dr Mohammad Hashim Kamali, has emphasised that excessive dependence on major powers for technology can undermine national sovereignty and contradict the objectives of Islamic law (maqasid al-shariah), particularly the preservation of intellect (hifz al-‘aql) and the well-being of society. The current crisis presents an opportunity for Malaysia to enhance its technological resilience through an Islamic approach that prioritises ethics and the public interest (maslahah) in technological development.
In addressing these challenges, Malaysia has several strategic opportunities that can be effectively leveraged. First, the nation must intensify investments in local research and development while strengthening regional cooperation within ASEAN. This approach would not only reduce dependence on imported technologies but also foster alternative, more resilient supply chains. Second, the promotion of shariah-compliant AI models that prioritise societal benefit should be further enhanced. This technological development model could emphasise practical applications in Islamic finance, zakat management, and education, thereby aligning technological advancement with Islamic values. Third, Malaysia must diversify its currency reserves and expand trade in local currencies with major trading partners. This step is crucial for mitigating exposure to the growing volatility of the US dollar. Investment in robust assets, such as gold, should also be seriously considered, given historical evidence of gold’s role as an effective hedge during economic crises. During the stagflation period of the 1970s, gold prices surged by as much as 26 times over the span of a decade, highlighting its potential as a wealth protection instrument.
The rise of Chinese technology, in fact, presents alternative opportunities for Malaysia. Chinese technology platforms, such as Alibaba Cloud and Huawei Pangu, offer more cost-effective solutions compared to their Western counterparts. The integration of ‘superapp’ ecosystems, following China’s model, through local platforms such as Touch ‘n Go or Grab could serve as an inspiration for the development of more comprehensive and integrated domestic applications. Furthermore, China’s experience in building smart cities and digital infrastructure offers valuable lessons for Malaysia’s technological advancement.
In the broader geopolitical context, Trump’s tariff policies may ultimately accelerate the shift in global economic and technological power. The dominance of the US dollar as the world’s reserve currency is increasingly being challenged, while China’s economic influence continues to grow. For Malaysia, success lies in the ability to adapt to this new reality by forging strategic partnerships with China while steadfastly preserving national sovereignty and adhering to Islamic ethical principles in technological development.
This balanced approach will not only safeguard national interests but also position Malaysia as a leader in ethical technology development within the region. The nation’s digital economic transformation must be pursued with a clear focus on three crucial elements: technological resilience, cybersecurity, and shariah compliance. By integrating these three pillars, Malaysia has the potential to emerge as a model of inclusive technological development for other developing nations to emulate.
In the long run, the world is witnessing a paradigm shift in the global digital economy. Trump’s tariff policies and the rise of Chinese technology mark merely the beginning of a new era of technological and economic competition. For Malaysia, this moment represents a critical juncture at which strategic choices must be made, whether to continue relying on traditional economic powers or to forge its own, more resilient path aligned with local values. The decisions made today will determine Malaysia’s position in the global digital economy in the coming decades.
In conclusion, while Trump’s tariff policies and the rise of Chinese technology present formidable challenges, they also offer opportunities for Malaysia to build a more independent and ethical technological future. Through prudent and strategic planning, Malaysia can aspire not merely to become a consumer of technology but to emerge as a leader in the development of a progressive and sustainable Islamic technology model. In this era of global uncertainty, the ability to adapt and innovate will be the ultimate determinant of the nation’s success in the digital economy.
Mohd Ammyrul Ashraf Sairan
Senior Lecturer, Unit Pengajian Islam dan Falsafah
Pusat Pengajian Bahasa, Tamadun dan Falsafah
Universiti Utara Malaysia
