MALAYSIA’S export sector is showing signs of strain as the United States prepares to impose a 25 per cent tariff on goods from the country, with manufacturers warning that uncertainty over trade terms is already causing damage.
The tariff, due to take effect on 1 August, was raised by one percentage point last week. While the increase from 24 to 25 per cent may seem modest, industry leaders say the bigger concern lies in the deepening lack of clarity around future trade policy.
Manufacturers told CNA that orders are slowing and buyers are increasingly hesitant, with some US clients turning to regional alternatives such as Vietnam and the Philippines.
"It's important for manufacturers to see clarity in the way forward, to make our investment decision or even our production planning,” said Jacob Lee, vice-president of the Federation of Malaysian Manufacturers.
“On the other side, the US customers are also adopting a wait-and-see approach. Will there be a flip-flop? Will there be a postponement?” he added. “They are also not giving us orders like before. They are giving us smaller orders so as to just cater to their pressing needs.”
Macroeconomic outlook steady, but risks rising
At a press conference on Monday, 15 July, Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz said Malaysia’s trade performance for 2025 remains within forecast, with growth expected at between 4 and 5 per cent.
However, he acknowledged that global trade is likely to moderate in the second half of the year amid rising uncertainties surrounding the US tariff measures.
The latest trade figures for June are due to be released later this week.
Tengku Zafrul added that negotiations with US officials are being accelerated in light of the looming deadline. Talks follow a meeting between Malaysian Prime Minister Datuk Seri Anwar Ibrahim and US Secretary of State Marco Rubio on the sidelines of the ASEAN Regional Forum in Kuala Lumpur last week.
While expressing optimism for a mutually acceptable outcome, Zafrul stressed that Malaysia would not compromise on matters of national sovereignty.
"There are no new terms, but of course, there are concerns on non-tariff issues. We've addressed one of that through the Strategic Trade Act, where we have now put one item in the list,” he said.
“But on issues where we cannot move, which is a red line – if you are in a sovereign country, and for strategic interests, are you willing to do that? So we need to study that carefully," he added.
Call for a dual-track strategy
Analysts have urged the Malaysian government to pursue a dual-track strategy – cushioning short-term impacts while laying the groundwork for longer-term trade resilience.
"This is where you have to double down efforts, not just on the trade and finance and economic track, but also on the diplomatic track,” said Amir Fareed Rahim, director of strategy at political risk consultancy KRA Group.
“What is important, in the short term, is the assistance that the government can give to the exporters who are managing this sudden 25 per cent export tariff, so there will be margin pressures on these businesses," he said.
Experts also underscored the importance of trade diversification, calling for broader reforms in sectoral focus and export markets as part of Malaysia’s economic strategy in an increasingly protectionist global environment.
With billions in trade on the line, the coming weeks will test Malaysia’s ability to safeguard its economy while navigating the pressures of international diplomacy and domestic priorities. - July 17, 2025
