MALAYSIAN exporters could face higher costs and greater scrutiny of their supply chains if the United States broadens its definition of manufacturing “excess capacity” under a Section 301 investigation, Investment, Trade and Industry (MITI) Minister Datuk Seri Johari Abdul Ghani said.
Johari said Malaysia was awaiting Washington’s decision, which is expected within three to four weeks following legal review and approval.
The outcome could have significant implications for Malaysia’s export-driven economy, particularly manufacturers whose products use components or inputs sourced from third countries.
Johari said the United States was still discussing the definition of “excess capacity”, including whether products using inputs from countries deemed to have structural overcapacity could be subject to additional scrutiny when processed or re-exported through Malaysia.
Malaysia has maintained that its domestic manufacturing sector does not have structural excess capacity, with production based on market demand.
However, a broader US interpretation could place greater pressure on Malaysian manufacturers to establish the origin of components and materials used in exported products, potentially increasing compliance costs and creating additional supply-chain burdens.
Malaysia is currently subject to a temporary 10% tariff under the existing arrangement, putting it in the lower tariff tier alongside 16 other economies, while some countries face a 12.5% rate.
Any revision following the investigation could affect the price competitiveness of Malaysian goods in the US market and influence investment and sourcing decisions by multinational manufacturers operating in the country.
Johari said the separate US inquiry into forced labour involving Malaysian supply chains had effectively been resolved, leaving the definition of excess capacity as a key outstanding issue.
“The process will take about three to four weeks to undergo legal review and approval before an official announcement is made,” Johari told reporters after the 43rd MAJECA-JAMECA Joint Conference.
“For now, the status quo remains,” he said.
The impending decision is therefore being closely watched by Malaysia’s manufacturing and export sectors, with the key concern being whether Malaysian-based production could be indirectly affected by policies aimed at excess capacity originating elsewhere. - September 1, 2026
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