Cynical observers might point to the fact that the crypto industry was the largest corporate donor in the 2024 elections, accounting for nearly half of all corporate contributions. Separately, Forbes reported in June that roughly 60% of Trump's current net worth is tied to crypto-related ventures, including a 40% stake in blockchain infrastructure company World Liberty Financial. The company launched the USD1 stablecoin in March this year, with its website proudly proclaiming, "inspired by Trump, powered by USD1".
It is precisely this class of cryptocurrency — stablecoins — that has been gaining momentum of late, growing at an 86% compound annual growth rate (CAGR) since 2020. At present, there are US$265 billion stablecoins in circulation (see Chart 1), and looking ahead, predictions vary from JP Morgan's conservative US$500 billion to Standard Chartered's US$2 trillion market cap by 2028. In both scenarios, what is clear is that stablecoins are ascendant.
Since its launch in 1Q2025, USD1 has grown to a market cap of US$2.2 billion and is the second-largest US-issued fiat-backed stablecoin in the market. That said, it is but a minor player in the broader stablecoin market dominated by a duopoly between Tether's USDT and Circle's USDC. Together, they account for 86% of the total stablecoin market (see table). Still, while the Trump-backed USD1 isn't leading the market, it may still be setting the tone. Its token symbol "USD1" says as much: stablecoins like USD1 are not designed to replace the greenback, but to digitise and extend its reach. But first, to understand the underlying mechanics.
What is a stablecoin?
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Unlike free-floating cryptocurrencies like Bitcoin or Ethereum, stablecoins are designed to maintain a fixed value — typically pegged 1:1 to the US dollar. This peg is upheld either by holding reserves (such as cash, T-bills and other liquid assets) or through algorithmic mechanisms that adjust supply in response to market conditions (see Chart 2). As such, stablecoins offer the core benefits of blockchain — near-instant, low-cost transactions on a 24/7 borderless network — without crypto's hallmark volatility. Beyond speed and cost-efficiency, the decentralised nature of blockchain's underlying digital ledger technology (DLT) also supports transparency and data integrity, while its foundation in cryptographic principles safeguards user-level privacy.
Owing to these functional advantages, stablecoins have become the most transacted token on-chain, despite representing only a small fraction (7%) of crypto’s total market cap. In 2024, stablecoin transfers amounted to US$27.6 trillion, outpacing not just Bitcoin (US$19.2 trillion) but also the combined volumes of traditional card networks Visa and Mastercard (US$25.5 trillion). To be clear, around 70% of stablecoin transactions were bot-driven, but this statistic does little to undercut the narrative of its growing relevance. If anything, it underscores the central role that stablecoins play in powering the automated, smart contract-driven DeFi (decentralised finance) ecosystem on blockchain. Since their inception, stablecoins have played a crucial role in the broader crypto ecosystem — facilitating trades between more volatile cryptocurrencies and serving as a safe haven during periods of market turbulence. BCG reports that 88% of stablecoin transactions last year were linked to crypto trading, arbitrage and liquidity operations on crypto exchanges. Within this context, USDC remains the stablecoin of choice.
Real-world adoption
See also: Trumpianomics will benefit the US greatly for years to come
Beyond blockchain, stablecoins have emerged as both an effective store of value and medium of exchange in the real world economy, particularly across emerging markets in Latin America and Sub-Saharan Africa, now the fastest-growing regions for stablecoin adoption. In structurally weak economies like Argentina and Türkiye, demand for US dollars has long shaped financial flows, serving as a hedge against inflation and currency devaluation. But equally, access to the dollar has often been limited, constrained by underdeveloped banking systems and government restrictions. Argentina's long-standing "Cepo Cambiario", a system of strict currency controls that was partially lifted this year, is a case in point.
Against this backdrop, stablecoins offer a convenient workaround: a synthetic US dollar accessible via self-custodial wallets that bypass traditional banks altogether. This has made them a financial lifeline in countries where institutional trust and financial infrastructure are lacking. In Türkiye, for example, stablecoin purchases surged to the equivalent of 4% of the country's GDP as inflation soared past 60% between June 2023 and 2024.
As a medium of exchange, one of the most transformative use cases for stablecoins has been in cross-border payments. Today's global financial system still relies heavily on the SWIFT system, which operates on the correspondent banking model. In this setup, financial institutions act as intermediaries to route international transfers. SWIFT itself serves as the messaging layer, instructing banks to credit and debit funds on both sides of the transfer. In regions with weak correspondent coverage, payments often pass through multiple intermediary banks, each layering on fees, FX mark-ups and delays tied to mandatory KYC (know your customer) and AML (anti-money laundering) checks. As a result, roughly 40% of SWIFT transactions still take five days or longer to settle. Beyond major corridors like US-UK, cross-border transfer costs can exceed 3% of transaction value. Fintechs like Wise have emerged as cheaper and faster alternatives, but they remain constrained by currency coverage and still expose users to FX spreads and transfer limits.
By contrast, stablecoins enable direct peer-to-peer transfers that bypass intermediaries entirely, cutting costs and drastically accelerating settlement times. On the Aptos blockchain, USDT transfers can cost as little as US$0.0001 and settle near instantaneously. This efficiency has made stablecoins increasingly attractive for both individuals and businesses engaged in cross-border trade.
Looking ahead, another promising use case is machine-to-machine payments within the emerging agentic economy. At their core, all blockchains operate on programmable “if-then” logic, making them compatible with agentic AI systems that rely on autonomous execution and conditional logic. In May 2025, crypto exchange Coinbase launched "x402", a new stablecoin payment protocol that allows payments to be made directly over the web. This enables APIs (application programming interfaces), artificial intelligence (AI) agents and applications to send and receive stablecoins simply by visiting a URL.
Issuers and exchanges
On the regulatory front, stablecoins are finally entering clearer legal territory. Key jurisdictions have enacted comprehensive legislation, including the European Union’s (EU) Markets in Crypto-Assets (MiCA) Regulation (2023), Singapore’s Stablecoin Regulatory Framework (2023), Hong Kong’s Stablecoins Bill (2024) and, most recently, the US GENIUS Act. The latter imposes strict requirements on stablecoin issuers: mandatory reserve backing, regular disclosures, and a prohibition on issuing interest-bearing stablecoins.
For more stories about where money flows, click here for Capital Section
In the US, the GENIUS Act forms part of a broader legislative push, alongside two other bills passed during "Crypto Week" that are now awaiting Senate approval: the CLARITY Act, which adopts a pro-crypto stance by classifying most cryptocurrencies as commodities, subject to Commodity Futures Trading Commission (CFTC) rather than Securities and Exchange Commission (SEC) oversight; and the CBDC Anti-Surveillance State Act, which blocks the development of a Fed-issued central bank digital currency (CBDC). In aggregate, this legislative trio represents the strongest political and regulatory tailwinds for the US’ crypto market in years. The equity markets have responded in kind: total crypto market cap surged past US$4 trillion for the first time following Crypto Week.
Curiously, however, USDC-issuer Circle saw its stock fall more than 10% that same week. The sell-off came on the heels of a rating downgrade by investment bank Compass Point, which revised its price target downwards from US$250 to US$130. Even so, the drop raises deeper questions: While the crypto world may be euphoric, how durable are the business models underpinning stock prices?
For now, Circle and Coinbase offer the clearest window into how US-based crypto firms are positioned. Circle is the only pure-play stablecoin issuer listed on the New York Stock Exchange, and Coinbase is both the largest distributor of USDC as well as the US’ biggest crypto exchange (see Chart 3 for how an exchange works). As it stands, Circle is up more than 500% since its blockbuster IPO last month. But a closer look reveals why caution may be warranted. Almost all (99%) of its revenue comes from interest earned on USDC reserves, mainly T-bills and reverse repos via a BlackRock-managed money market fund (MMF). While part of the recent decline may reflect profit-taking after the stock's extraordinary post-IPO rally, what is clear is that Circle remains highly exposed to interest rate cycles. Further, the GENIUS Act’s ban on yield-bearing stablecoins leaves Circle more reliant on distribution partners to help preserve USDC’s appeal by offering yield to users through third-party wrappers or platform-based incentives.
In contrast, Coinbase primarily earns revenue from transaction fees on its exchange (see Chart 4). This ties the company's fortunes directly to trading activity, which should rise with stablecoin (and broadly, crypto) adoption. Coinbase also benefits from USDC distribution: under its revenue-sharing agreement with Circle, Coinbase receives 100% of the reserve income from USDC circulating on its platform (22% of the total supply, as at 1Q2025) as well as 50% of the remaining reserves income after Circle pays other partners. Still, Coinbase holds just 7% market share of crypto exchanges globally, far behind market leader Binance (38%).
Does smart money need ‘smart’ money?
When it comes to traditional finance (TradFi), the rise of blockchain has sparked both complementary and competitive responses. Citi's latest quarterly call highlights this duality, with a strategy that focuses on both value-added services, such as fiat-crypto (and vice versa) conversions, digital asset custody and reserve management services, even as speculation continues building about a potential stablecoin consortium between Citi, JP Morgan and Bank of America. Separately, the bank has also been offering tokenised deposit products since late 2023. And as Citi CEO Jane Fraser notes, it is the latter — tokenised deposits — that may offer the more compelling route for traditional financial institutions. While researchers at Galaxy Digital predict at least 10 new stablecoin launches backed by TradFi players in 2025, the better question isn't if they will succeed in gaining traction, but whether launching a stablecoin even benefits TradFi players in the first place (see sidebar).
Another area attracting institutional interest is the tokenisation of real-world assets (RWA). In short, this refers to creating digital representations (or tokens) of traditional financial assets. In fact, stablecoins are themselves a form of tokenisation, serving as proxies for off-chain assets (the fiat reserves held by issuers) brought onto the blockchain (see Chart 5). Growing demand is now driving the development of financial products built on tokenised RWA, offering new ways to invest using blockchain infrastructure. Blackrock's USD Institutional Digital Liquidity Fund (BUIDL), a tokenised MMF that launched in 2024, is a leading example. The fund functions as a traditional MMF, investing in dollar-denominated assets, such as T-bills and cash, but investors buy and sell BUIDL tokens on-chain using USDC. These tokens represent fund ownership, entitling holders to receive daily yield distribution (dividends) in USDC on the blockchain (see Chart 6).
Tokenised financial instruments offer the benefits of blockchain such as faster settlement, 24/7 trading and improved fractionalisation, that is, lowering investment thresholds. In short, they reduce friction. For financial institutions, tokenised finance presents a way to retain traditional clients while tapping into new investor segments. And as more capital migrates on-chain, demand for regulated token-based investment products is only expected to accelerate.
US dollar dominance
In the near term, no digital currency — not even stablecoins — has emerged as a definitive winner over fiat, especially the greenback. But as noted at the outset, stablecoins do not disrupt the US dollar's dominance. They reinforce it. Most (>99%) stablecoins today are pegged to the US dollar and backed by US assets. In the US, this structure is now codified: the newly passed GENIUS Act mandates US-listed stablecoin issuers to hold 100% of reserves in US assets (T-bills, MMFs and other such approved high-quality liquid assets).
This has four significant implications. First, more stablecoins mean more dollar-based reserves, drawing capital into US financial markets and reinforcing demand for the US dollar. Ordinarily, a stronger US dollar runs counter to trade policy by making US exports less competitive. But this is perhaps less of a concern under a Trump administration that leans on tariffs to extract trade concessions and boost domestic industries. In fact, a firmer US dollar cushions the inflationary impact of tariffs, effectively turning stablecoins into an ally to Washington's protectionist agenda.
On another front, demand for stablecoins supports the Fed's ability to keep rates lower. Stablecoin issuers have emerged as significant buyers of US Treasuries: in 2024, Tether alone ranked as the seventh largest buyer of T-bills globally. As stablecoins gain further traction, this demand could lower the US government's borrowing costs meaningfully. Empirically, large volumes of USDT issuances have triggered short-term spikes in Treasury prices, although the effect typically fades within the hour. A separate study by the Bank for International Settlements (BIS) quantifies this impact more precisely: US$3.5 billion inflow into stablecoins is expected to reduce the three-month T-bill yield by five basis points over 20 days.
Third, stablecoins expand the US dollar's influence across regions with limited access to physical greenbacks. This is already playing out in parts of Latin America and Sub-Saharan Africa, where demand for the dollar is high, but access has traditionally been constrained as mentioned above. As cross-border stablecoin transactions grow, they function as a digital extension of the US dollar, bolstering its status as the world's reserve currency. At the same time, stablecoins serve to undercut the momentum for CBDCs, many of which were envisioned to challenge today's US dollar-led international payment system.
Finally, and more strategically, stablecoins do not just expand the US dollar's network, but embed it within global digital infrastructure. With most pegged to USD, the broader ecosystem of wallets, exchanges, payment rails and DeFi protocols becomes anchored to the US dollar by default. Over time, this dependence gives the US the leverage over access to the digital financial system, a form of control that, as history shows, can — and has been — weaponised to exert geopolitical power.
On the flipside
Of course, every argument has its wrinkles, and the case for stablecoins is no exception. To start, blockchain technology itself faces foundational constraints. Much like the "impossible trinity" in international macroeconomic policymaking, blockchain grapples with its own trilemma: the trade-off between security, scalability and decentralisation. In practice, one of these pillars must be compromised to strengthen the other two.
With broader adoption, scalability becomes the most pressing challenge. Public blockchains rely on consensus mechanisms where every transaction must be verified and validated by the network. This limits the total number of transactions that can be processed in a single moment. The Ethereum blockchain, for instance, only processes an upward of 15 transactions per second. And unlike traditional payment networks, where fees are typically a fixed percentage point, stablecoin transfer fees (or gas fees) fluctuate based on network congestion. As such, growing adoption of blockchain networks may ironically degrade the very benefits the technology aims to deliver: speed, efficiency and lower costs.
Of stablecoins specifically, the label "stable" may in fact be something of a misnomer. While they are more stable than most cryptocurrencies, their pegs have failed in the past due to technical flaws, structural vulnerabilities or broader market contagion. In May 2022, the collapse of Terra's algorithmic stablecoin UST triggered a chain reaction of USDT redemptions that briefly pushed it off-peg. Less than a year later, USDC slipped below US$0.90 following the collapse of Silicon Valley Bank, which held a portion of Circle's reserves. These incidents underscore how closely interwoven stablecoins are within both the crypto and traditional banking systems. And while the US GENIUS Act imposes stricter reserve and liquidity standards, its scope is limited to US-based issuers. Foreign and non-compliant stablecoins face no trading restrictions for a three-year grace period — an eternity in the crypto world. In the interim, incumbent market leader Tether continues to face persistent scrutiny over its opaque reserves.
The rise of stablecoins also has implications for monetary dynamics in the US. While foreign demand for stablecoins channels capital into US assets, the impact of domestic demand is less straightforward. If inflows into stablecoins come at the expense of existing bank deposits, traditional credit creation suffers. Banks rely on deposits to fund loans to the real economy, and deposits that are shifted into stablecoin reduces the size of this pool. Although the overall money supply remains unchanged since stablecoin issuers must hold equivalent reserves, this effectively diverts capital away from productive lending towards passive liquidity parking. On another front, DeFi speeds up how quickly money changes hands by enabling capital to move between trading, borrowing and yield-generating strategies at a pace traditional finance cannot match. Thus far, the impact of this faster circulation remains self-contained. As at 2024, less than 5% of stablecoin transactions involve on- or off-ramps into fiat, meaning spillover into the real economy remains muted — for now.
On a practical level, real-world adoption of stablecoins remains riddled with frictions. On- and off-ramp conversions can incur up to 7% in additional transaction fees, eroding their appeal for everyday use. While merchants may benefit from lower payment processing costs, the consumer proposition is weaker, especially given that traditional systems offer stickiness through cashback and other reward programmes. The irreversible nature of blockchain transactions also offers no recourse for fraud, chargebacks or errors.
The bottom line
While the broader public still grapples with distrust towards crypto, stablecoins present a grounded value proposition by combining the technological advantages of blockchain with the monetary stability of fiat. Yet, for all the recent market euphoria, most stablecoin activity remains confined within the crypto ecosystem, even as its entanglement with traditional financial systems deepen.
The leading alternative model of digital money CBDCs has long drawn criticism for enabling state surveillance and control. But the fact is that delegating core monetary infrastructure and function to private entities like Circle and Tether raises equally thorny questions about risk and governance.
What we have explained in this article is the basic workings of stablecoins, their benefits and limitations. We think that over time, stablecoins will gain traction in real world applications, beyond the crypto ecosystem. And therefore, a more relevant question for investors would be — how does one profit from this growth? Current players like Circle or Coinbase, or shares of the increasing number of companies adopting crypto treasury strategy? Perhaps even the traditional banks and payment networks that are looking to issue their own stablecoins and/or facilitate stablecoin transactions? The honest answer is that, at this moment, the winners remain unclear. What is clear, however, is this: should stablecoins continue their current trajectory and emerge as the dominant form of digital cash, the US dollar will be the ultimate winner. Nearly all stablecoins are currently pegged to the US dollar, far more than the greenback’s current market shares in global payments and forex reserves (estimated at roughly 50% to 60%). In short, a digitised US dollar will be more deeply embedded in the global financial system than ever before.
All three of Tong’s portfolios gained for the week ended Aug 27. The Absolute Returns Portfolio was up 0.9%, lifting total portfolio returns to 32.8% since inception. The top three gainers were Alibaba (+3.8%), Berkshire Hathaway (+2.4%) and ChinaAMC Biotech ETF (+1.6%). Meanwhile, the biggest losers were Trip.com (-4.6%), Tencent (-3.2%) and SPDR Gold MiniShares Trust (-3.0%).
The Malaysian Portfolio gained 0.1% led by Hong Leong Industries (+2.2%) and United Plantations (+0.8%). The biggest loser was Insas Bhd – Warrants C (-20.0%) while shares for LPI Capital (-0.4%), Kim Loong Resources (-0.4%) and Maybank (-0.1%) ended marginally lower. Total portfolio returns now stand at 182.8% since inception. This portfolio is outperforming the benchmark FBM KLCI, which is down 13.2% over the same period, by a long, long way.
Last but not least, the AI Portfolio recovered 2.0% for the week. Total portfolio returns now stand at -0.7% since inception. The top three gaining stocks were Horizon Robotics (+8.8%), RoboSense Technology (+6.5%) and Alibaba (+3.7%). Intuit (-5.1%) and ServiceNow (-0.3%) were the only two losing stocks last week.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
Tokens and coins
While digitalisation and tokenisation are reshaping the financial world, neither stablecoins nor blockchains are essential to all forms of digital currency. Crucially, it is imperative to distinguish between stablecoins, tokenised deposits and central bank digital currencies (CBDCs), as they differ significantly in design, regulatory treatment and underlying backing mechanism.
Tokenised deposits are blockchain-based representations of fiat deposits issued by commercial banks. They retain the regulatory protections of traditional deposits, such as FDIC insurance in the US, while gaining the benefits of blockchain. Unlike stablecoins, which are backed by reserve assets, tokenised deposits are backed by actual bank deposits. This means that tokenised deposit issuances do not compete with the existing deposit base, but in fact reinforces the banking system's role in credit intermediation. In the US, they also fall outside of the scope of the newly passed GENIUS Act, allowing them to offer yields when linked to interest-bearing accounts. That said, scalability and interoperability within the crypto ecosystem remains a key challenge, and broader adoption of tokenised deposits hinges on the development of shared standards (akin to Ethereum's ERC-20 for cryptocurrencies) that can unlock cross-bank and cross-chain network effects.
CBDCs, on the other hand, are digital sovereign currencies issued by a country's central bank. They typically come in two main forms: retail CBDCs, intended for general use, and wholesale CBDCs, to facilitate interbank and institutional transfers. As at July 2025, 137 countries are reportedly in the midst of exploring CBDC projects. CBDCs do not necessarily require blockchain. After all, blockchains were specifically designed to establish consensus in trustless environments, where no central authority exists. CBDCs by contrast are issued, backed and controlled by central banks, with trust anchored in the authority of the issuing government. China's digital yuan (e-CNY) and India's e-rupee are currently the most advanced pilot programmes in action. In the US, even as the Anti-CBDC Surveillance State Act advances through Congress, the Federal Reserve remains actively involved in the development of a cross-border wholesale CBDC through Project Agorá. The proposed Anti-CBDC Act bans the Fed from issuing a retail CBDC and stands to make the US a global outlier in CBDC development.
Opposing views to our article, ‘Trump wins the trade war — and the advantage of future US relative productivity gains’
We received a number of well-articulated and fair opposing views — from friends like Dr Apurva Sanghi (the World Bank lead economist for Malaysia) — to our provocative article published a few weeks ago (“Trump wins the trade war — and the advantage of future US relative productivity gains” and the accompanying sidebar “Trumpianomics will benefit the US greatly for years to come”, Aug 18, 2025). Scan the QR code for the full articles.
Because these views were expressed informally, via WhatsApp chats, we decided to summarise the main points and present them to our readers here. After all, both sides deserve a fair hearing. To quote Confucius, “Real knowledge is to know the extent of one’s ignorance” or Bertrand Russell, “The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubt.”
And yes, if you have differing views from us, write to us, let us know. We believe in freedom of expression, of civilised dialogue. No one owns knowledge. Or to quote Albert Einstein, “Knowledge should be shared. It belongs to humanity.”
Summary of key opposing views:
1. It is debatable if the “US won”, although it is true that “Trump won”. The US has lost beyond its citizens having to pay more due to the tariffs. It lost credibility and standing and has shown the world that it cannot be relied upon. This has long-term adverse consequences to the US.
2. It is debatable if tariffs can lead to sustainable large-scale reshoring of manufacturing activities, given China’s manufacturing dominance.
3. The deals each country made with the US — the devil lies in the details. Many are vague, open-ended “framework agreements” spread over years (beyond US President Donald Trump’s term) rather than iron-clad deals.
4. It is estimated that US producers, distributors and consumers will end up paying for the bulk of the tariff revenue to be collected by the US government. Some estimate as high as 80%. Therefore, tariff is in effect a regressive tax, especially if this additional revenue is used to pay for corporate tax cuts.
In addition to the above summary, we are also printing the written response from Dr Ong Kian Ming.
Response to Tan Sri Tong Kooi Ong’s article on Trump’s tariffs :
Tan Sri Tong Kooi Ong’s column entitled “Trump wins the trade war — and the advantage of future US relative productivity gains” (first published in The Edge Malaysia on Aug 18, 2025) is a thought-provoking piece, given that it flies in the face of economics orthodoxy that tariffs are bad for a country in the long term. Given the unprecedented nature of President Trump’s modus operandi, it is important to analyse the possible effects of his tariff policy in a rational and unbiased manner, free from our own emotional reactions to the substance as well as the style of his policy announcements.
Firstly, we must acknowledge the possible benefits to the US economy. Under normal circumstances, an unprovoked increase in the tariff rate of one country against another would usually elicit a response of retaliatory tariffs from the victimised country. With the exception of China, no other country has dared take a tit-for-tat approach in ramping up its own tariffs against the US in response to Trump’s reciprocal tariffs. Even the mighty European Union (EU) caved in to make a trade “deal” with Trump. This means that the US government is able to increase its revenues, as much as US$300 billion this year and US$600 billion in 2026, from tariffs on imports without negatively affecting US firms’ ability to export to other countries. Tong has also pointed out the possible benefits of an increase in manufacturing investments by US and non-US companies in the long term, although it will be hard to estimate the value of these “reshored” activities. Trump’s tactics will also likely increase market access for US-based companies, which will benefit from reduction in tariff lines and lowering of non-tariff barriers by countries, including Malaysia, which have announced trade “deals” with the US.
But there are many “unknown” outcomes that Tong seems to have counted as positives before the eggs have been hatched. It remains to be seen to what extent countries will be able to deliver on “promises” to buy more US goods. For example, Malaysia’s commitment to buy up to US$150 billion of US goods over the next five years, including Boeing planes and LNG supplies, are likely purchasing commitments by GLCs (government-linked companies) such as MAS and Petronas that would have taken place regardless of Trump’s reciprocal tariffs. It remains to be seen what kinds of formal mechanisms will be put in place by the US Commerce Department to monitor compliance for the many trade “deals” that have been made with various countries. It is also questionable to assume that the Trump tariffs will reduce the US trade deficit in the long run. For this to take place, there must be more fundamental shifts to the consumption patterns of the average American or if there is a serious economic recession that significantly dampens US consumption. The overall US trade deficit increased during Trump’s first presidency and further increased during the Biden presidency despite continued tariffs on China and the start of more active industrial and reshoring policies such as the CHIPS Act. (https://www.nytimes.com/2025/02/05/business/economy/us-trade-deficit-2024-record.html)
More importantly, there are possible negatives associated with the Trump tariffs that need to be highlighted. Trump’s unilateral policies have provided the push for many countries and regions to expand their trade ties and supply chains with one another that will likely leave out the US in the long run. Within the region, Indonesia is likely to conclude its free trade agreement (FTA) negotiations with the EU by the end of this year and the timelines for the EU FTA negotiations with the Philippines, Thailand and Malaysia are likely to be shortened as a result of the Trump tariffs. Ironically, Trump’s wavering position on Nato and his insistence of EU countries to increase their defence spending, have spurred the EU to seek greater cooperation with other erstwhile US allies such as Canada, which may shut out US companies from future lucrative defence contracts. Finally, there is a real danger that the US will ultimately lose out in the competitiveness battle in the long run, partly because of the distortionary effects of the Trump tariffs, but more so from policies associated with clamping down on high-skilled immigration and admission of foreign students, especially at the postgraduate level, and the cutting of research funding and staff in key US government agencies such as the National Institutes of Health (NIH).
For Malaysia, Trump’s policies have opened a new horizon of policy debates, especially with regard to our own approach towards industrial and trade policies. For this reason, it is important for constructive engagements to continue, including through some of the more provocative views espoused in “Tong’s Portfolio”.
Ong Kian Ming is an adjunct professor at Taylor’s University. He can be reached at kianming.ong@taylors.edu.my
(Aug 28, 2025)
