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KUALA LUMPUR (July 27): CIMB Treasury and Markets Research said Malaysia’s effective US tariff burden has eased slightly after the new Section 301 forced labour tariff took effect.
In a note on Monday, CIMB said the new 10% US tariff on Malaysian exports, effective from July 24, has slightly lowered Malaysia’s effective tariff rate to 5.1% from 5.2% due to more product exemptions compared with the previous Section 122 tariff, which expired on the same day.
Section 122's 10% tariff was imposed on Feb 24 for a maximum of 150 days after the US Supreme Court struck down the International Economic Emergency Powers Act tariffs.
The share of Malaysia’s exports to the US affected by tariffs is also expected to decline to 31.9% from 33.0%, based on a trailing 12-month period from July 2025 to June 2026. This would remove an estimated RM3.3 billion worth of exports from tariff coverage.
The lower effective rate reflects the fact that only about one-third of Malaysia’s exports to the US are subject to the Section 301 tariff, while the remaining exports are either exempt or already covered under other US tariff measures.
Among the newly exempted Malaysian exports are palm oil, palm kernel oil, oleochemicals and plywood, worth around RM2.1 billion. Some semiconductor measuring and testing equipment also received exemptions.
CIMB said the new Section 301 tariff replaces the previous 10% Section 122 tariff, which expired on July 24. Malaysia received the lowest Section 301 tariff rate of 10%, alongside Indonesia, reflecting their commitments under the Agreement on Reciprocal Trade (ART).
However, the firm cautioned that the improvement may be temporary as the US Trade Representative continues its separate investigation into structural excess capacity involving Malaysia and 15 other economies.
If additional tariffs are imposed after the investigation, Malaysia’s overall tariff rate could rise towards 15%-19%, closer to the level outlined under the ART.
Despite the potential risks, CIMB said the latest Section 301 forced labour tariff leaves Malaysia’s trade exposure to the US largely unchanged for now, with the immediate impact remaining limited.