Trump’s global tariffs: What’s next for trade and industry?

“Malaysia will utilise the Trade and Investment Framework Agreement (TIFA) to seek reciprocal trade gains and pursue a Technology Safeguards Agreement with the US to facilitate high-tech cooperation in semiconductors, aerospace, and digital economy sectors,” the ministry stated.

MITI emphasised that Malaysia ranks 15th on the US list with a trade surplus of US$ 24.8 billion in 2024 while noting that “the US enjoys a trade surplus in services with Malaysia, reflecting strong bilateral economic ties.”

Meanwhile, Tatler Asia’s Most Influential Malaysia 2023 honouree and president of the Malaysia Semiconductor Industry Association, Dato’ Seri Wong Siew Hai, said: “This will somewhat affect our market to the US as it would cause inflation in the US as well as a rise in the cost of goods, and therefore the demand would drop accordingly.”

His advice is that we need to find new markets and find solutions to be more globally competitive as well as hoping that the government “accelerate the National Semiconductor Strategy and get ourselves more competitive and go up the value chain like what they have planned to do.”

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Former deputy minister of International Trade and Industry and Pro Vice-Chancellor for External Engagement and Lead of the PPE Industry Advisory Panel at Taylor’s University, Dr Ong Kian Ming, outlined the varied impact the tariffs will have on Malaysia’s export sectors.

“The semiconductor industry may have some reprieve as this sector is exempted from the reciprocal tariffs of 24 per cent but is still subject to the 10 per cent base tariff,” Ong explained.

“Other manufacturing sectors are not so fortunate as the medical devices sector (including rubber gloves and machinery used in hospitals), the furniture sector, the oleochemicals sector, the plastics sector and some commodities including rubber and cocoa, will all be hit with the 24 per cent tariff.”

The impact, according to Ong, will depend on how much cost can be passed on to US consumers, the decrease in US domestic demand resulting from price increases, and the broader negative effects on the global economy.

OCBC Global Markets Research has already reduced its 2025 GDP growth forecasts for the region, noting that “Malaysia could be more insulated” than some neighbouring countries like Vietnam and Thailand, which face higher tariff rates. 

Ong also anticipates several shifts in regional trade dynamics, including potential trade diversion from China to other partners like Malaysia, strengthening of trade flows between regions outside the US, and a push for greater ASEAN integration.

“I do not think that any country in ASEAN will be willing to introduce countermeasures against the US as a response to these tariffs,” he stated. “It is much more likely that individual countries in ASEAN would want to directly lobby the Trump administration for tariff relief in exchange for the purchase of more American goods.”

AHAM Capital noted in its report that “Malaysia’s technology sector, which forms the bulk of our exports, remains unaffected for now” due to the semiconductor exemption. The firm added that “there remains scope for lower tariff rates if individual countries successfully negotiate concessions with US counterparts.”

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Looking ahead, Ong does not anticipate these tariffs to be temporary measures, suggesting they may remain “even if Trump is no longer in office but a Republican maintains control of the White House after 2028.”

However, despite the sentiment that some companies may consider moving back a small part of their manufacturing operations to the US, Ong believes most companies would want to stay in Malaysia to take advantage of the regional market and the existing benefits of investing in the country. 

“What may likely happen in the short term is the slowdown of new FDIs into the region, including Malaysia, by US companies and other companies which do a lot of business with the US because of the uncertain position occupied by Malaysia vis-à-vis our relationship with the Trump administration on trade and other non-economic issues,” he adds. 

He advised Malaysian businesses to “work closely with MITI by sharing relevant data and information on the impact of these tariffs on their respective companies and industries as part of a larger strategy of engagement between Malaysia and the US.”

This is in line with MITI’s statement, which emphasised that Malaysia is “facing this challenge from a position of strength and preparedness,” with diversified markets and products providing some buffers against the tariff impact.

“The fundamentals of our economy remain robust,” the ministry concluded. “MITI believes the Malaysian economy will continue to be resilient amidst these challenges.”

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