KUALA LUMPUR (Jan 20): Malaysia’s export outlook is expected to remain challenging in 2026 as economists forecast a slowdown driven by renewed US tariffs, heigntened geopolitical risks, and the fading of "front-loading" activities.

This cautious outlook comes despite a historic performance in 2025, where Malaysia's exports grew by 6.5% to reach an all-time high of RM1.61 trillion, supported by a strong finish in December, with shipments abroad surging 10.4% to RM153 billion from a year earlier.

December's growth far exceeded the 2.5% median estimate in a Bloomberg survey and a sharp acceleration from November's 7% growth. Imports also saw a double-digit increase, rising 12% to RM133.7 billion. Trade surplus for the month rose a marginal 0.1% to RM19.3 billion, marking the 68th consecutive month of surplus since May 2020.

For the full year of 2025, Malaysia's exports grew 6.5%, while imports rose 6.2%, raising total trade by 6.3% past RM3.1 trillion for the first time. Annual trade surplus rose 9.2% to RM151.8 billion.

Following the release of the official trade data, MBSB Research said it had revised its 2026 export growth forecast down to 4.5% from 6% previously, and import growth forecast to 5% from 5.5%, on anticipation of fading front-loading effects, a high base, and the impact of US tariff measures on final demand.

In a note, it said the electrical and electronic (E&E) sector — Malaysia’s largest export segment — faces additional pressure from the recently announced 25% tariff on certain semiconductor products, which could dampen the broader economy and technology industry.

“On the upside, E&E exports are expected to remain resilient amid the ongoing global tech upcycle, while the oversupply condition in the commodity market may result in the exports of mining goods to constrain overall growth," it said, adding the Agreement on Reciprocal Trade (ART) with the US is expected to enhance market access by reducing trade uncertainties. In addition, the government's pursuit to broaden and diversify export markets and strengthen bilateral ties should help mitigate external headwinds, it noted.

OCBC Group Research expects goods export growth to slow to 2.2% in 2026, down from 6.5% in 2025, due to payback from aggressive front-loading of exports to the US seen last year, and softer external demand.

It also projected that import growth would slow to 4.3% from 6.2% in 2025, as investment spending noramlises. "These forecasts are consistent with our view that headline GDP growth will slow to 3.8% in 2026 from 4.9% in 2025,” it said in a separate note.

UOB Global Economics and Markets Research expects a bumpy trade outlook for 2026, amid the renewed US tariff threats and escalating geopolitical risks, and has likewise kept its export growth forecast modest at 2.5%, slightly below the Finance Ministry’s 2.8% projection.

While recent US tariffs on eight European countries — including Denmark, Norway, Sweden and the UK — are not expected to have any direct impact on Malaysia, potential secondary effects will take time to assess, it said. “These spillovers could, however, provide a potential tailwind for Malaysia’s trade as global supply-chain diversification further gathers pace,” it said.

On the newly imposed US tariff on semiconductors, UOB said while most local companies are not involved in producing high-end semiconductor fabrication tools, multinational electronic manufacturing services firms and companies making advanced equipment could be affected if such products are shipped back to the US.

Meanwhile, CIMB Treasury and Markets Research, who expects persistent growth in E&E to continue to provide momentum for exports in the first half of the year, remains cautious on the second half due to potential weakness in non-E&E exports, besides the impact of front-loading and higher US tariffs.

“Coupled with our inflation outlook, we maintain our call for an unchanged overnight policy rate (OPR) at 2.75% for the whole year, amid a 2026 GDP forecast of 4.4%,” it added.