KUALA LUMPUR (July 9): Local industries are raising alarm after US President Donald Trump announced a sweeping 25% import tariff on all Malaysian goods, effective Aug 1 — a move they say threatens Malaysia’s export competitiveness, especially against regional rivals like Vietnam.

The tariff shock comes despite recent trade dialogues and will hit Malaysia hard, given that the US is its third-largest trading partner, accounting for 11.3% of total trade in 2024. Exports to the US jumped 23.2% year-on-year to a record RM198.65 billion, led by electrical and electronics (E&E), machinery, and rubber products.

Malaysia’s E&E exports to the US totalled RM119.86 billion — over 60% of total exports — with semiconductors making up a significant share. Although earlier guidance from the Ministry of Investment, Trade and Industry (Miti) suggested many semiconductor exports would be exempt from extra tariffs, it remains unclear if exemptions will hold under the new tariff regime.

Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai warned the 25% tariff would erode demand with end-users, meaning importers possibly scaling back orders.

He added that companies may front load shipments before the August deadline, but longer-term business decisions are clouded by uncertainty.

Wong said industry members cannot absorb the 25% tariff. "If it was 1% or 2% maybe it could be absorbed, but 25% is too high," he said.

A recent MSIA survey found no members able to absorb tariffs, citing high costs and thin margins.

Miti had earlier noted that 65% of E&E exports are intermediate goods produced by Malaysia-based US multinationals — which adds further complexity to the situation.

The broader manufacturing sector has reacted sharply, citing rising pressure on margins amid domestic cost hikes from expanded sales and service tax (SST) and higher electricity tariffs.

Federation of Malaysian Manufacturing (FMM) president Tan Sri Soh Thian Lai said the 25% blanket tariff will worsen an already difficult operating environment.

“The newly announced 25% blanket tariff, if implemented as expected on Aug 1, 2025, is expected to intensify these pressures across the board, particularly for companies operating on thin margins or bound by long-term supply contracts,” Soh said in a statement on Tuesday.

He said while some critical products like semiconductors may be exempted, supporting industries — including parts, machinery, and services — remain exposed to significant disruption. Sectors like rubber, textiles, furniture, and industrial components are expected to be hardest hit.

Soh noted that Vietnam got a deal to cut its US tariff to 20%, while other Asean countries weren't affected by the latest tariff wave. 

He warned this could push US buyers to choose cheaper sources and hurt Malaysia’s market share. He urged the government to step up its diplomatic efforts immediately to avoid losing long-term competitiveness.