KUALA LUMPUR (Jan 15): Malaysia’s exports could grow at a slower pace this year, due to impending higher US tariffs, though trade diversions could provide some cushion, according to think tank Socio-Economic Research Centre (SERC).

Export growth may decelerate to 4% this year, from an estimated 5.1% in 2024, said SERC executive director Lee Heng Guie. US imports from Malaysia rose about 8% annually in 2018-2022, though the higher tariffs promised by the incoming Trump administration could hit export volumes this time around, he noted.

"There will be some positive offsetting effects, benefiting from trade diversion”, as Chinese companies and foreign multinational corporations shift their orders from China to Malaysia, Lee said during a media briefing on Malaysia’s 2025 economic outlook on Wednesday.

Malaysia is in a “strategic position for reconfiguring sourcing and supply chains under the China+1 and Taiwan+1 strategies”, but the extent of the gains will depend on how well Malaysian manufacturers adapt to sourcing alternatives, he said.

Even before taking office, US President-elect Donald Trump has threatened to unleash massive tariffs, including even goods imported from allies. He has promised far more prohibitive trade policies than those implemented during his previous term..

In particular, he has threatened tariffs targeted at several countries, including China, Malaysia’s biggest trading partner.

The impact will depend on factors such as product substitutability, adjustments to supply chains, and Malaysian firms’ ability to remain cost- and price-competitive, said Lee.

To mitigate the risks, Lee urged the government to strengthen its position by maintaining liberal trade policies, enhancing the manufacturing and services sectors, and prioritising trade agreements.

"Malaysia has a unique strategic advantage as one of the most conducive investment locations in the region," he added.