MALAYSIAN exporters are sounding the alarm as the clock ticks down to a looming trade deadline that could see all goods entering the United States slapped with a 24% tariff—threatening to derail one of the country’s most critical economic lifelines.
With less than a month remaining before the tariff comes into effect, the Federation of Malaysian Manufacturers (FMM) has warned that more than half of local exporters are bracing for a sharp decline in orders and earnings, unless an agreement is struck to mitigate the impact.
According to the FMM, 52% of exporters expect demand from the US to fall if the proposed hike goes ahead, with nearly half anticipating that their profit margins could be cut by over 30%.
FMM president Tan Sri Soh Thian Lai cautioned that some firms—particularly those in highly cost-sensitive sectors such as electrical machinery services (EMS), which support American-linked manufacturing in Malaysia—may be forced to scale back operations.
“While the full financial impact and potential job losses remain difficult to quantify, FMM cautions that the combined effects of order cuts, shrinking margins and prolonged cost pressures could have serious repercussions for the country’s export-reliant industries,” he told The Star.
The potential tariff escalation follows Washington’s decision in April to impose a provisional 10% duty on all Malaysian imports. The US also offered a 90-day window to negotiate revised, country-specific rates in response to concerns over trade imbalances. That window is set to close in early July.
Soh noted that even a compromise rate of 10% to 15% would leave Malaysian exporters at a comparative disadvantage to countries with established preferential access to the US market, such as Mexico or Vietnam. He warned of the risk of a “structural shift” in sourcing behaviour by American buyers.
“Since April 2025, all Malaysian exports entering the United States have already been subjected to an across-the-board 10% tariff, which has added considerable pressure on companies, especially those whose products previously enjoyed low or zero tariffs.
“A further escalation of tariffs would significantly deepen this impact and pose a serious threat to Malaysia’s export performance,” The Star reported him saying.
Nevertheless, Soh praised the Ministry of Investment, Trade and Industry (Miti) for taking proactive steps to address the crisis.
The ministry, through its National Geoeconomic Command Centre Task Force, recently led a trade mission to Washington, DC, where Malaysian officials engaged with the Office of the United States Trade Representative to seek exemptions for key sectors including steel and aluminium.
Meanwhile, the Socio-Economic Research Centre’s executive director, Lee Heng Guie, said that companies in the electronics and electrical (E\&E) sector have been accelerating their shipments to the United States in an attempt to get ahead of any further tariff hikes.
“What we’ve observed since April is that some local exporters, particularly in the E\&E sector, have been front-loading their shipments to the United States to beat the higher tariff deadline.
“This spike in export numbers is likely to continue until May or perhaps early June, based on feedback from businesses and buyers we’ve spoken to,” he said.
However, Lee also observed growing caution on the part of American buyers.
“They are delaying shipments and deliveries, adopting a ‘wait-and-see’ attitude regarding the final tariff decision.
“The concern is that if the tariff jumps to 24%, they may not be willing to absorb that additional cost.
“On the other hand, if the outcome is less than or remains at 10%, they would prefer to wait and only proceed once the situation is clear,” he said.
Lee added that negotiations were ongoing between Malaysian sellers and US buyers on how to split the tariff burden, and suggested that businesses would likely continue adjusting their strategies well beyond the 90-day negotiation period.
In a broader policy context, Ahmad Yazid Othman, senior fellow at the Malay Economic Action Council, said Malaysia must now reckon with the reality that higher tariffs are likely to remain a fixture of global trade.
“We hope that the government will do more to spur domestic consumption and be prepared that tariffs will increase.
“As an exporting country, not every sector will be equally affected, which is why we shouldn’t put all our eggs in one basket.
“We need to diversify and spread the risk by investing in more economic opportunities across other sectors, especially those not reliant on exports. I believe there’s a silver lining in this situation as well,” he said. - June 5, 2025
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