Malaysian industries can breathe easier now

The Star

a day ago

PETALING JAYA: Malaysian industries have found relief after the United States slashed tariff rates to 19%, just hours before the Aug 1 deadline.
The 6% reduction from the previous 25% also signalled a successful negotiation between the Malaysian government and one of its largest trading partners, the United States.
The Federation of Malaysian Manufacturing (FMM) President Tan Sri Soh Thian Lai said the positive outcome reflects the result of constructive dialogue and engagement between the Malaysian and US governments, including the Prime Minister's direct engagement with President Donald Trump.
'The FMM commends the Ministry of Investment, Trade and Industry and other relevant agencies for their continued efforts in advocating for the inte­rests of Malaysian industry on the international stage.
'The FMM views this decision as a timely and strategic move, particularly in the current global trade environment. Although the six percentage point reduction may seem modest, it is significant for industry players, especially for sectors operating on thin margins or those competing in price-­sensitive global supply chains,' said Soh.
'The reduction enhances the overall cost competitiveness of Malaysian-manufactured goods in the US market and serves as an important signal of improved bilateral trade relations.
'While some may argue that the impact on Malaysian exporters could be limited because US importers bear the tariff cost, the FMM believes that the burden of tariffs is often shared across the supply chain.
'Therefore, a reduction in tariffs benefits not only Malaysian exporters but also US importers. It improves the overall cost equation and can stimulate demand for Malaysian goods, especially in sectors where price plays a crucial role in purchasing decisions,' he added.
Soh said that while it is still early to assess the full extent of the impact of the tariff rate cut, the FMM anticipates that several export-oriented industries, including electrical and electronics (E&E), machinery and equipment (M&E), rubber-­based products and processed industrial goods, may benefit from improved competitiveness and increased demand.
'The FMM expects that any changes in export volumes in the short term may be gradual.
'While some front-loading of orders may have occurred ear­lier, the tariff cut is likely to encourage more exporters to consider taking on new orders going forward,' he said.
'Manufacturers are mindful of the current volatility in global markets, including ongoing supply chain disruptions and are expected to factor these conside­rations into their planning and responses to future shifts in market demand,' he added.
Malaysian Semiconductors Industry Association Malaysian president Datuk Seri Wong Siew Hai said the 19% rate has levelled the playing field as several Asean countries are now at 19%.
He noted that Malaysia can draw on its strong position in the semiconductor space.
'We have a strong industrial ecosystem, good supply chain, multinational companies with over 50 years of experience, strong infrastructure and talents.
'It puts Malaysia in a good light for investments,' said Wong, adding that its position as a neutral non-aligned country as well as its performance as Asean chair also works to its advantage.
Malaysian Furniture Council president Desmond Tan said the reduction from 25% to 19% is posi­tive news for the industry as the United States remains Malay­sia's number one export destination.
'Hopefully, these latest tariffs can reduce uncertainty; however, exporters will still need to adapt to a higher-cost trade environment, and continued support from the government remains valuable,' he said.
He said that given the United States' position as Malaysia's top export destination, any policy shift within that market would directly impact the industry's performance.
The Medical Device Manufacturers Association (Perantim) President Johari Abu Kasim said the new tariff of 19% puts Malaysia at par with its key neighbours, especially countries that manufacture medical devices like the Philippines, Thailand and Indonesia.
'Export to the United States remains competitive, robust and commands high demand from the importers,' he said.
He said Perantim's stance is that Malaysia needs to continuously seek new markets in Europe, Africa, BRICS, and capitalise on the lucrative Asean market.
'There are over 200 other countries besides the United States with populations over 7.5 billion people and export promotion needs to be geared up. Medical devices are a necessity in any country,' he said.
While Malaysian pharmaceutical products are exempted from the tariff, there was no mention of medical devices.
Malaysia's medical device exports to the US were valued at RM13.69bil (US$3.07bil) in 2024, making up 36.97% of the country's total medical device exports, which stood at RM37.03bil.
Malaysia's trade with the US grew 10.8% year-on-year to RM27.32bil.
Exports expanded by 4.7% to RM16.28bil on strong demand for E&E products, processed food and non-metallic mineral products.
For the first half of 2025, trade with the United States grew by 32.6% to RM186.62bil.
Exports continued their upward trend by recording double-digit expansion of 28% to RM111.59bil on growing exports of E&E products, processed food as well as machinery, equipment and parts.