KUALA LUMPUR (Sept 19): Malaysia’s trade momentum is set to moderate further in the coming months as tariff risks and softer external demand weigh on exports, with gains in electrical and electronics products and machinery offset by declines in petroleum and chemical shipments, said economists on Friday.
Exports in August rose 1.9% year-on-year to RM131.6 billion, according to the Ministry of Investment, Trade and Industry, significantly undershooting the 3.0% expansion forecast in a Bloomberg poll. This marked a sharp slowdown from July’s 6.8% growth.
RHB Investment Bank said it maintains a cautious view on the trade outlook as the impact of tariffs, which took effect on Aug 8, gradually sets in and weighs on Malaysia’s trade and manufacturing sectors.
The bank projected full-year export growth at 3.4%, with second-half growth easing to 3.1% from 3.8% in the first half.
“Slower growth in trade performance (especially exports to US) is likely in the coming months as the announced tariff rates take effect and frontloading activity fades,” it said in a note on Friday.
Still, RHB noted that diversified export markets, easing US-China tensions, and Malaysia’s strong electrical and electronics base could cushion some of the downside.
UOB Global Economics & Markets Research also flagged ongoing tariff uncertainty as a key drag on Malaysia's trade outlook. It noted that the latest data suggest the country’s export performance has become increasingly uneven, with gains in shipments to China and the European Union offset by weaker demand from the US, Japan and Hong Kong.
This, the research house said, reflects broader shifts in global trade conditions, compounded by six consecutive months of double-digit declines in imports of intermediate goods, which point to softer manufacturing momentum ahead.
“As long as the Trump administration’s tariff and foreign trade policies remain unresolved, external demand and business sentiment are likely to stay subdued,” UOB cautioned, keeping its 2025 full-year export growth projection at 3.8%, compared with 5.8% in 2024.
Kenanga Research shared a similar view, pointing out that while near-term risks persist, technology-driven demand could provide some cushion. The research house expects export growth to benefit from the global tech upcycle tied to artificial intelligence adoption, as well as trade diversion effects and a gradual recovery in key trading partners.
“Key challenges remain, particularly the risk of a slower-than-expected economic recovery in China and global trade disruptions from Trump’s tariffs, which may dampen consumer and business sentiment,” Kenanga said, while keeping its 2025 export growth forecast at 5.0%.
Electrical and electronics products, which accounted for 42% of total exports, grew 10.1% year-on-year in August, while machinery and equipment rose 14.5%. However, exports of petroleum products contracted 17.6%, weighing on overall momentum.
By destination, shipments to China climbed 10.4% and those to Taiwan surged 32.7%. However, deliveries to the US and Japan dropped 16.7% and 15.4% respectively.
Gross imports fell 5.9% year-on-year to RM115.47 billion, dragged by a 16.8% fall in intermediate goods and an 8.9% decline in consumption goods. Imports of capital goods rose 11%.
Malaysia’s trade surplus widened to RM16.13 billion, more than double the surplus a year earlier.