In recent years, the BRICS nations—Brazil, Russia, India, China, and South Africa—have sought to challenge the Western-dominated global order by exploring ways to reduce dependence on the U.S. dollar in international trade. This movement gained further traction following sanctions on Russia over the war in Ukraine. However, the prospect of these efforts being met with steep U.S. tariffs raises significant concerns for global trade, particularly in the semiconductor industry.

The BRICS Push for De-Dollarisation

One of the primary motivations for the BRICS nations to explore alternatives to the U.S. dollar is to increase financial sovereignty and reduce vulnerability to Western economic pressures. While a common BRICS currency remains an ambitious and distant goal, the bloc has taken concrete steps to settle bilateral trade in national currencies. The idea has also gained interest from other emerging economies like Malaysia, which has applied to join BRICS.

However, these efforts have caught the attention of the United States, which sees the de-dollarisation movement as a potential threat to its economic hegemony. The U.S. President-elect, Donald Trump, has proposed imposing 100% tariffs on BRICS nations to discourage any initiatives to replace or sideline the dollar in global trade. While these tariffs are still hypothetical, the potential fallout is already raising alarms in key industries, particularly semiconductors.

Malaysia’s Role in the Semiconductor Supply Chain

Malaysia, though not yet a BRICS member, plays a pivotal role in the global semiconductor supply chain, accounting for approximately 13% of the world’s chip testing and packaging. The country is home to significant investments from U.S. semiconductor firms, which rely on its infrastructure and workforce. Malaysia’s trade minister, Tengku Zafrul Aziz, has warned that the proposed tariffs could disrupt this vital supply chain, harming both U.S. companies and global markets.

Semiconductors are essential to virtually every modern industry, from automotive manufacturing to consumer electronics. Supply chain disruptions in this sector have far-reaching consequences, as we saw in 2020 when global shortages delayed production and innovation across the board. A 100% tariff would not only raise costs but could also push BRICS nations and their partners, including Malaysia, to accelerate efforts to create alternative supply chains that bypass the U.S. entirely.

A Global Semiconductor Tug-of-War

The semiconductor industry is already a flashpoint in the competition between the U.S. and China, with Washington imposing export restrictions on advanced chips and equipment to curb China’s technological advancement. These tariffs, if implemented, could extend that competition to BRICS nations and their allies, forcing them to diversify their semiconductor supply chains further.

Malaysia, given its strategic position, could face a difficult choice between maintaining its partnership with U.S. firms and aligning more closely with the BRICS bloc. The latter might involve fostering closer ties with China, which is actively pursuing semiconductor self-sufficiency and could welcome Malaysia’s expertise in chip testing and packaging.

Could Tariffs Backfire?

The United States risks pushing BRICS nations and their allies further into each other’s arms by imposing harsh tariffs. Russia has already warned that such measures would strengthen the resolve of countries seeking alternatives to the dollar. The ripple effects could also extend beyond semiconductors, affecting trade in critical industries like energy, manufacturing, and agriculture.

For the semiconductor sector specifically, tariffs could incentivize the creation of new alliances and partnerships in Asia, including collaborations that exclude U.S. firms. This could accelerate the trend of regional self-reliance and create a fragmented global semiconductor market, undermining the very dominance that the U.S. seeks to protect.