Willingness to address US concerns a positive

The Star

18-07-2025

Apex Securities said Malaysia may need to pivot to increasing imports of US goods.
PETALING JAYA: The 25% tariff imposed on Malaysia is likely due to Trump administration's dissatisfaction with the concessions offered so far, says Apex Securities.
Earlier this week, Investment, Trade and Industry Minister (Miti) Tengku Datuk Seri Zafrul Abdul Aziz said the United States had urged Malaysia to lift foreign equity restrictions in key sectors as part of ongoing tariff negotiations.
While sectors like logistics and construction could have some liberalisation, other sectors that are more strategic, like oil and gas, telecommunications and finance, are unlikely due to sovereignty and national security considerations.
In a report, the research house said the automotive industry is unlikely to see full liberalisation.
However, targeted tariff reductions on US-made vehicles may be offered as a trade-off.
It added the country's recent policy moves indicate a willingness to address concerns from the United States.
'Miti's new requirement for trade permits on the export, transshipment, and transit of high-performance artificial intelligence chips of US origin is a constructive step, and its decision to centralise the issuance of certificates of origin for exports to the United States aims to tighten control over potential transshipment abuses,' Apex Securities said.
Still, the research house opined that Malaysia may be compelled to accept higher tariffs on transhipped goods as part of a broader compromise.
On top of that, the country's bumiputra policies are sensitive and non-negotiable, so the government's preference for bumiputera-owned companies in procurement will be intact.
'Malaysia's globally respected halal certification system is unlikely to be diluted.
'The most feasible concession may involve streamlining the certification process to facilitate US meat imports,' Apex Securities said.
Additionally, countries with high export exposure to the United States, including Malaysia, are likely to face stronger pressure to compromise, thereby raising the odds of a favourable outcome.
In light of that, Apex Securities said Malaysia may need to pivot to increasing imports of US goods, such as liquefied natural gas, agricultural commodities like corn and soybeans, Boeing aircraft, or possibly defence assets.
'Collaboration in emerging sectors such as nuclear technology or small modular reactors is plausible but constrained by high capital costs,' it noted.
Meanwhile, the research house said if final tariffs settle at 20% or higher, the gross domestic product growth could risk falling below 4%.
It explained that given the limited room for large fiscal stimulus due to political resistance, monetary policy is likely to bear the primary burden of supporting growth.
'A lower overnight policy rate (OPR) would help support real estate investment trusts while falling bond yields point to potential upside for fixed income,' it said.
On a brighter note, Apex Securities said Malaysia's underlying fundamentals are still quite resilient.
'Malaysia remains well positioned, given its pivotal role in the global semiconductor supply chain and relative competitive advantage with lower tariffs relative to peers,' it said.
Furthermore, the research house said it had revised the 2025 forecasts, taking into account the year-to-date inflation figure of 1.5%.
'We revised our 2025 inflation forecast to 1.9% from 2.4% previously.
'Similarly, following Bank Negara's 25-basis-point cut in July, we now expect the OPR to stay at 2.75% for the remainder of the year.'