KUALA LUMPUR (April 4): Malaysia’s economy may expand at a slower pace than expected this year, as the latest US tariff measures hurt export-oriented factories in the country.

The impact also comes from Malaysia’s major trading partners such as China and the European Union (EU), that have all been slapped with steep US tariffs, according to three market economists as they cut their forecast for gross domestic product (GDP) by 0.6 to 1.0 percentage-point for 2025.

“We are revising down our outlook for Malaysia’s external trade, given weaker US import demand, driven by the imposition of higher tariffs and a decline in bilateral and global trade activity,” CIMB Securities said.

The research house now expects Malaysia’s economy to grow 4.0%, instead of 5.0% previously.

The official government forecast calls for GDP growth of between 4.5% and 5.5% for 2025. Bank Negara Malaysia recently flagged intensifying external headwinds with international trade tensions, but nevertheless, maintained the growth forecast.

US President Donald Trump announced in an executive order, a 24% tariff on goods imported from Malaysia effective April 9, in a sweeping trade policy hitting all of its trading partners. The rate of tariffs range from 10% to 50%.

Malaysia maintains a trade surplus with the US, primarily exporting electronics, palm oil and machinery. The US is Malaysia’s third-largest trading partner since 2015. Shipments to and from the US accounted for 11.3% of Malaysia’s total trade, underscoring its importance.

For United Overseas Bank, the direct impact from US’ reciprocal tariffs on Malaysia and secondary effects from tariffs on major trading partners could subtract 0.7 percentage-point from its baseline forecast to 4.0% for 2025.

“We think the prolonged uncertainty and significance of Malaysia’s exposure to the semiconductor segment will impact trade and growth prospects,” the house cautioned.

The US has imposed a 34% levy on goods from China, Malaysia’s biggest trading partner. The EU, another major trading partner of Malaysia, will be charged 20% by the US.

Read also:
US tariffs may weigh on Malaysian banks’ loan growth, raise provisions — CIMB Securities
Trump administration sued over Chinese import tariffs
Trump's tariffs stoke global trade war as China, EU vow response 
Here are Trump’s reciprocal tariffs by country 
Malaysia hit with 24% US reciprocal tariff effective April 9 
Malaysia won’t retaliate, will negotiate with US on tariffs — Miti 
Malaysian manufacturers sound alarm over US tariff, call for strategic govt action
Malaysia's semicon firms brace for future US action after dodging tariffs