APRIL 4 — On April 2, 2025, US President Donald Trump announced sweeping new tariffs: a blanket 10 per cent base tariff on all imports into the United States, with higher duties on selected countries — including 24 per cent on Malaysian goods.
Other key trade partners, such as China (34 per cent), Vietnam (46 per cent), Cambodia (49 per cent), Thailand (32 per cent), and Indonesia (28 per cent), were also targeted.
The move marks a significant escalation in US protectionist policy and is expected to weigh heavily on Asia’s financial markets and trade-dependent economies.
Malaysia’s trade exposure to the US
The United States is a critical economic partner for Malaysia, particularly in high-technology and capital-intensive sectors.
According to the Department of Statistics Malaysia (DOSM), as of February 2025, the US is Malaysia’s second-largest export destination, accounting for 14.8 per cent of total exports — equivalent to RM17.5 billion, a robust 28.9 per cent increase year-on-year.
This surge was primarily driven by electrical and electronic (E&E) products, which rose by RM2.5 billion or 30.8 per cent, affirming the central role of the US in Malaysia’s semiconductor and high-tech manufacturing value chains.
On the import side, Malaysia sourced RM9.88 billion worth of goods from the US in the same month, reflecting a 10.5 per cent year-on-year increase.
These imports are not merely consumer goods — they include critical capital goods, scientific instruments, and advanced machinery, which support Malaysia’s production capabilities. The US is thus not just a market for Malaysia’s exports, but a strategic contributor to its industrial ecosystem.
Who will suffer most in Malaysia?
The imposition of a 24 per cent tariff directly threatens Malaysia’s E&E sector, which contributed 40 per cent of total exports in February 2025.
This sector is deeply integrated into regional and global supply chains, with many Malaysian firms functioning as component suppliers to multinational brands that depend on US demand.
Smaller firms and SMEs that supply parts or provide services to this ecosystem may face cascading effects — from reduced export orders to tighter margins, especially if they are unable to absorb higher costs or pivot quickly to new markets.
Furthermore, imported high-tech capital goods from the US are likely to become more expensive, potentially slowing down investments in automation and precision manufacturing — both of which are central to Malaysia’s shift up the value chain.
It’s not just Malaysia, but all of Asean
While Malaysia will bear costs, it is important to note that these tariffs are not uniquely targeted.
Countries like Vietnam and Cambodia face tariffs of 46 per cent and 49 per cent, respectively — levels that signal a broader US effort to curb trade imbalances with nations seen as benefiting disproportionately from globalisation.
Thailand (32 per cent) and Indonesia (28 per cent) are similarly affected, suggesting that Washington’s trade calculus is shifting from bilateral grievances to structural realignment.
In effect, the US is signalling that trade surpluses — especially those arising from supply chains anchored in Asia — are no longer acceptable under its current economic doctrine.
In the short term, these tariffs will disrupt trade flows across South-east Asia. But in the medium term, the question becomes: Will US consumers tolerate the cost of protectionism?
American consumers and global inflation
Economic logic suggests that US households and businesses will ultimately bear much of the cost of the new tariffs.
Higher import duties raise input costs for American manufacturers and consumer prices for end-users. Given that many goods from Asia are intermediate components, the impact on US industrial competitiveness and retail inflation could be significant.
As inflationary pressures mount, the US Federal Reserve may be compelled to ease interest rates earlier than previously planned to support domestic demand.
This, in turn, could weaken the US dollar, particularly if more countries begin diversifying trade invoicing into other currencies.
Moreover, if global trade with the US declines over time due to persistent tariffs, the global demand for USD may also fall, further eroding its dominance in trade finance.
Such shifts could encourage deeper financial and trade integration elsewhere — particularly across Asia, where demographic and demand dynamics are on the rise.
A drone view shows a ship and containers at the Port of Santos, in Santos, Brazil April 3, 2025. — Reuters pic
Reinforce regional and multilateral trade agreements
To mitigate overreliance on any single market, Malaysia must redouble its commitment to regional and multilateral trade frameworks.
These platforms are not just about tariff access; they offer stability, legal predictability, and diversified growth pathways.
Key agreements include Regional Comprehensive Economic Partnership (RCEP), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Malaysia-EU Free Trade Agreement (MEUFTA, still under negotiation), ASEAN Trade in Goods Agreement (ATIGA), BIMSTEC and South-South cooperation platforms, Malaysia-Turkey FTA, Malaysia-Chile FTA, and Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA).
Through these agreements, Malaysia can pivot exports toward other growing markets, deepen integration with regional supply chains, and enhance its appeal to global investors seeking alternatives to tariff-affected economies.
Malaysia must, in my view, move beyond compliance and shape the agenda in these frameworks.
The rise of domestic markets in populous nations
Countries with large populations — particularly China and India — are uniquely positioned to weather global trade disruptions due to their vast internal demand.
Their rising middle classes, urbanisation, and digitalisation offer a buffer against external shocks.
China’s “dual circulation” strategy, which emphasises self-sufficiency and domestic consumption, is already showing signs of success in reducing reliance on Western markets.
India, with its expanding digital economy, manufacturing base, and 1.4 billion population, is becoming a powerful destination in its own right.
These demographic and structural advantages suggest that demand-led growth will play a more prominent role in the global economy — and Malaysia must be ready to engage more deeply with these emerging hubs.
These are not merely fallback markets — I believe they represent Malaysia’s future trade frontier.
Navigating a new era of trade friction
The latest round of US tariffs marks a turning point in global trade. For Malaysia, the short-term impact is clear: increased uncertainty, cost pressures, and reduced access to a vital market.
But this also presents an opportunity — to accelerate regional integration, diversify export markets, and build economic resilience.
In a world where unilateral trade actions can reshape markets overnight, Malaysia must respond not with retreat, but with realignment.
The global economy is fragmenting, but that does not mean it is closing. For those who move decisively and strategically, there is still room to grow, trade, and lead.
* Dr Goh Lim Thye is a senior lecturer at the Department of Economics, Faculty of Business and Economics, Universiti Malaya.
**This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
