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

ALL signs indicate that Malaysia’s trade momentum will continue strongly through to year’s end, underpinned by continued front-loading of shipments as firms brace for tariff and supply-chain uncertainties.

This follows a strong October performance, with exports surging 15.7% year on year to a record RM148.3 billion, marking the fourth consecutive month of gains. This pushed total trade to an all-time high, representing a sharp reversal from the volatility seen earlier in the year.

For the first 10 months of the year, Malaysia’s total exports increased by an average of 6%, compared to 5.1% during the same period last year.

Economists who spoke with The Edge attribute October’s outsized performance to Malaysia’s diversified export base, which helped cushion cyclical headwinds. They also point to ongoing inventory restocking and supply-chain shifts driven by tariff fears, which have benefited the country’s trade flows.

“This is all thanks to front-loading shipments to the US ahead of the deadline tariff adjustments, which support the overall trade performance. The October trade performance also highlighted the benefit of trade diversification, as shipments to non-US markets such as the EU (October: 23.8% versus September: 19.7%) and China (October: 7.5% versus September: 2.9%) helped offset the decline in US shipments (October: -2.6% versus September: 24.2%), following the imposition of the US reciprocal tariff,” AmBank Group chief economist Firdaos Rosli tells The Edge.

“The latest performance can sustain and strengthen export growth, particularly in view of stronger manufacturing shipments, including demand for E&E (electrical and electronics) products. The global semiconductor market in the Americas and Asia-Pacific is still resilient. Furthermore, it helps that Malaysia is currently entering the third phase of the investment upcycle,” he adds.

According to Malaysia External Trade Development Corp (Matrade), robust demands were recorded for E&E products as well as optical and scientific equipment, both of which registered their highest export values so far.

The mining sector maintained its positive trajectory for the second consecutive month, driven by higher exports of metalliferous ores and metal scrap. The agriculture sector posted steady growth, led by strong exports of palm oil and palm oil-based agriculture products.

“The front-loading will continue until year’s end. Real resourcing is also happening [amid uncertainties of how the US trade direction will play out next year] and this will continue, as businesses will not risk waiting for the US tariffs to be finalised,” says Associated Chinese Chambers of Commerce & Industry of Malaysia’s Socio-economic Research Centre executive director Lee Heng Guie.

Some economists suggest that the full impact of the latest US tariff measures will only be felt in Malaysia next year.

“The US-China trade war 1.0 took a while before it began to appear in official data. This time, I suspect that both importers and exporters are sharing the US reciprocal tariff burden, which is why we are not seeing US inflation misbehave wildly and trade falling off a cliff,” notes AmBank’s Firdaos.

He warns, however, that cost pressures will eventually force changes. “There will be a point where either one or both will start feeling the cost pressure and subsequently re-strategise,” he says.

The lag impact, he explains, is typically due to the time required for businesses to adjust to pricing and operational changes. “Having said that, we should note that US President Donald Trump may grant more exemptions from reciprocal tariffs as they did on Nov 14. If US inflation is to remain stubbornly high or even spike because of reduced US imports, there will be more exemptions and such a scenario is positive to world trade,” says Firdaos.

The external backdrop remains fluid. The one-year tariff truce between the US and China, from November 2025 to November 2026, has temporarily frozen major tariff escalations. Lee notes that, while brief, it provides a window for businesses to “decide with which superpower they want to anchor their trade”.

“Barring potential US-sector specific tariffs, the outlook for the next few months remains constructive, supported by the reciprocal tariff agreement and the one-year trade truce between the US and China,” says UOB Malaysia senior economist Julia Goh.

“The truce may be temporary, but it should help steady China’s trade outlook in the near term. It also creates space for further negotiations and reduces immediate risks of escalation. As both countries scale back their interdependence, ongoing supply-chain and sourcing shifts could divert some production and orders to Malaysia, but this also carries risks of lower-priced imports and stronger competition for domestic players.”

Firdaos says the current situation may be tactical. “There have been many postponements over the past few months, so this could be a negotiation strategy by the US. As long as global trade prospects remain somewhat predictable, Malaysia’s trade prospects should fare well,” he says.

He cautions, however, that other new developments surrounding the US Trump administration, escalating US-China tensions as well as slowdowns in major economies could weaken global demand and derail Malaysia’s trade momentum.

Bank Negara Malaysia’s 2025 export growth forecast of 5.2% now appears conservative, with some economists lifting their projections towards 6% to 6.5%. But most expect growth to cool next year as base effects normalise and global growth in the US and China moderates.

Lee anticipates 2026 to be “a period of ‘payback’… and we may see numbers start to come off”, although ongoing resourcing shifts will still support exporters in selected sectors.

Domestic conditions — including labour-market improvements, infrastructure rollout and the ringgit’s trajectory — will also shape Malaysia’s competitiveness, moving into 2026. SERC’s Lee calls the local currency “a key determinant for businesses”.

UOB’s Goh believes Malaysia’s core strengths in E&E and customised manufacturing will remain the primary drivers behind roughly 80% of the country’s exports.

“To withstand rising competition and cost pressures, Malaysian firms will need to focus on product differentiation, enhance value-added offerings — including customisation, digitalisation and sustainability — and broaden their material sourcing. These strategies can help safeguard market positions and mitigate cost pressures from new foreign entrants,” she says.

Goh notes that strong exports of E&E and manufactured goods, together with improved agricultural commodity shipments driven by higher prices and volumes, underpinned overall trade performance. “[Furthermore,] the October recovery in crude petroleum exports offers a promising signal that may help offset the mining sector’s persistent multi-quarter downturn,” she says.

UOB has raised its full-year export forecast for 2025 to 6%, and maintained its 2026 projection at 2.5% to reflect the expected moderating of global trade as higher tariffs take effect, “although a sharp decline is not anticipated”.

“Various initiatives to diversify and leverage existing FTAs (free trade agreements) will also provide support. News that the US may delay sector-specific tariffs on semiconductors could further alleviate risks,” Goh adds.

AmBank’s Firdaos believes that as long as the artificial intelligence and technology sector remains healthy, particularly in the US, Malaysia’s E&E sector will continue to support growth, given its share of total exports was almost 40% last year.

He points to the Malaysian Investment Development Authority’s data showing that Malaysia’s manufacturing sector secured RM93.8 billion, or 32.9%, in approved investments for the first nine months this year, supported by RM22 billion from the E&E segment.

“We believe growth will sustain itself as manufacturing remains solid in the E&E sector, aligning with the World Semiconductor Trade Statistics projection of an 11.2% increase in global semiconductor sales for this year. This growth is expected to continue robustly through 2026, albeit at a modest pace of 8.5%,” Firdaos notes.

Regarding domestic factors, Lee notes that the local currency has been one of the best-performing emerging market currencies this year.

“This is not a strong year for the US dollar, with concerns over de-dollarisation and other pressures undermining its strength. Whether the dollar pairs against the pound, euro or yen, Malaysia has been one of the best-performing emerging-market currencies this year; it closed around 4.12 yesterday. I’m looking at 4.15 to 4.20 by end-2025,” he says.

He expects the US dollar’s weakness to continue as de-dollarisation persists. “It won’t crumble, but it will weaken. That supports the ringgit — depending, of course, on how the US economy and inflation evolve. If US inflation falls and rate cuts accelerate, that could turn the dollar positive again.”

For Malaysia, Lee notes that “subsidy reforms, improving fiscal anchors and rising foreign reserves will continue to support the ringgit, with near-term sentiment likely to stay firm. Whether it breaks below 4.00 next year and strengthens further will ultimately depend on policy dynamics”.

As 2026 shapes up to be a more measured year defined by tariff realignments, softer global growth and the ongoing reshuffling of supply chains, how Malaysia positions itself in this shifting landscape, will determine whether the current momentum becomes a sustained recovery or a short-lived peak. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.