This article first appeared in The Edge Malaysia Weekly on September 8, 2025 - September 14, 2025

WHILE the impact of US tariffs was not fully reflected in second-quarter corporate earnings, especially with the front-loading activity ahead of the Aug 1 implementation deadline, technology, transport and logistics, and furniture firms are bracing for the repercussions from the tariffs.

Following negotiations, Malaysia was slapped with a lower tariff of 19%, down from the 24% announced previously.

At the same time, US President Donald Trump also threatened to impose a 100% tariff on the imports of semiconductors from countries without US-based manufacturing.

Thomas Yong, CEO of Fortress Capital Asset Management Sdn Bhd, says the tariffs have resulted in problems, especially for the manufacturing and technology sectors.

“A handful of Malaysian tech companies have shared that their US-based semiconductor customers flagged ongoing concerns over softness in the Chinese market, with customers pushing back and deferring deliveries, indicating demand-related headwinds caused by trade tensions.

“Further, manufacturing companies have shared that their key end customers are demanding aggressive cost reductions to offset tariff-induced cost inflation.”

ViTrox Corp Bhd (KL:VITROX), for one, has acknowledged that exchange-rate volatility, higher reciprocal tariffs by the US and persistent component shortages may weigh on near-term margins.

In 2024, Malaysia’s exports to the US totalled RM198 billion, of which RM120 billion consisted of electronics and electrical (E&E) products. This made up 20% of the country’s total E&E exports. Of the RM120 billion worth of E&E exports, semiconductor products contributed RM60.6 billion, or half of the total.

Despite the projected growth in global semiconductor sales, TA Securities maintains a cautious outlook on the tech sector amid lingering uncertainties over potential US semiconductor tariffs.

“Any substantial tariff measures could significantly disrupt the global supply chain, given the industry’s highly globalised nature. As such, we expect most customers to adopt a wait-and-see stance pending further clarity on tariff implementation,” it says in a Sept 3 note.

That said, the research house believes that the Malaysian government will remain committed to implementing the National Semiconductor Strategy, which aims to enhance the country’s position in the global semiconductor value chain.

RHB Research appears to be more positive on the tech sector, pointing to the constructive orders and revenue trends in 2H2025 despite fears over waning front-loading activities.

“We continue to observe a stronger year-on-year (y-o-y) revenue growth trend for most players, on the back of a gradual industry recovery, which we think should gain pace. The tone of tech companies’ management teams points towards stronger loadings ahead, due to the recovery seen in certain segments such as smartphones, artificial intelligence strength, as well as servers and power management integrated circuits. These are further supported by various new opportunities and clientele gained via the China Plus One and Taiwan Plus One strategies.”

The research house highlights that the tech sector’s valuation remains compelling, offering an attractive risk-reward ratio, although the share prices of some firms have seen a recovery.

“We believe Malaysia’s tech space is expected to be a net beneficiary of the US tariffs imposed — that is, various project transfers, capacity relocation and foreign direct investments — given the robust semiconductor ecosystem and talent in the country. In fact, there is limited direct exports of chips from Malaysia to the US (estimated at well below 10% of exports, for all the players within our coverage).

“In addition, the imminent benchmark interest rate cut on the US federal funds rate should also underpin the sector’s valuation, cushioning the negative headwinds on the stronger ringgit versus the US dollar.”

RHB Research continues to favour Malaysian Pacific Industries Bhd (KL:MPI) and Unisem (M) Bhd (KL:UNISEM) as they are expected to ride the chip sector’s recovery, with diversified customer bases, opportunities from the China Plus One strategy and the commencement of new programmes and customers.

Kenanga Research notes that the sector’s visibility has improved following recent US tariff alignments with key trading partners, which tilt the cycle towards potential recovery that will be led by the automotive segment.

It is also of the view that clarity in electronic manufacturing services players’ outlook should improve as customers resume ordering after assessing tariff implications, but a sustained uplift in earnings visibility will only emerge once the US finalises its investigations for the sector under Section 232 of the Trade Expansion Act of 1962.

Forecasts by Semiconductor Equipment and Materials International (SEMI) show that global sales of total semiconductor manufacturing equipment by original equipment manufacturers could reach a new record high of US$125.5 billion (RM531.2 billion) in 2025, representing 7.4% y-o-y growth.

For transport and logistics, TA Securities says US tariffs remain the biggest risk for logistics and maritime players, especially since the tariff between the US and China remains unclear. Both countries have extended their trade truce for another 90 days until Nov 10.

“Benchmarking to the tariff rate of 19%-20% range for most Southeast Asian countries; 50% for India and Brazil; and 15% for Japan, South Korea and most European Union countries, the tariff imposed on imports from China would reshape the global supply chain if the tariff were to deviate and [be] set at extreme levels,” it adds.

While global trade has deteriorated sharply due to the surge in tariffs, trade policy uncertainty and worsening Middle East crisis, Kenanga Research expects the domestic logistics sector to play a key role in connecting economies that benefited from the trade diversion arising from US-China trade tensions.

The furniture industry is another casualty of US tariffs. For one, Lii Hen Industries Bhd (KL:LIIHEN), which derives more than 90% of its sales from North America, swung into the red with a net loss of RM9.25 million in the April to June 2025 quarter, from a net profit of RM7.01 million in the same period a year ago, due to the temporary baseline tariff of 10% effective April this year.

“The overall growth impact of US tariffs should still be negative, particularly the risk of trading in volume and profitability. The slower global demand because of tariffs will limit exporters’ ability to raise or even maintain sales prices, putting more pressure on margins,” it said when releasing its latest quarterly results.

The US is the largest export market for Malaysian-made furniture. According to data from the Malaysian Timber Council, exports of wooden furniture to the Americas totalled RM5.71 billion in 2024, representing 57.8% of total wooden furniture exports. 

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