Recently, Donald Trump announced the imposition of tariffs on US imports in an effort to reduce the country’s trade deficit. Many countries will be affected, including Malaysia. Malaysia is expected to face a 24% tariff on its exports to the US. This does not bode well for Malaysia’s economy, as the US is Malaysia’s second-largest export destination, accounting for 14% (US$43.43 billion) of total exports, after Singapore (16%), according to Trading Economics.
Electrical and electronic equipment made up the largest share of Malaysia’s exports in 2024, valued at US$121.19 billion, followed by mineral fuels, oils, and distillation products. Among the products exported to the US, electrical and electronic equipment represented the largest portion, amounting to US$23.68 billion. These figures indicate that Malaysia’s economy is significantly reliant on exports to the US, especially electrical and electronic products.
In 2024, Malaysia’s economic growth was driven by several factors, including robust investment and improved export performance. Therefore, the US tariffs could have serious repercussions for the country. Electrical and electronic equipment is produced by the manufacturing sector contributing significantly to Malaysia’s GDP. According to Statista, in 2023, approximately 2.8 million people were employed in the manufacturing sector, representing 17.5% of the total labour force.
Imagine the impact if this sector shrinks due to the new tariffs, which would make Malaysian exports more expensive in the US market. The demand for Malaysian products, especially electrical and electronic goods, might experience a decline. This may lead to a drop in employment in the sector, resulting in many workers losing their jobs.
Malaysia is not the only country that might be affected. Others, such as China, are also in the same boat. The US is not only the world’s largest economy but also the largest importer of many product categories, including cars, electronics, industrial machinery, and pharmaceuticals. Therefore, Malaysia should brace itself for potential economic challenges attributed to the imposition of tariffs.
Bank Negara Malaysia (BNM) might consider reducing the Overnight Policy Rate (OPR) to 2.75% as early as July in response to the imposition of tariffs. This move can help soften the economic blow. One less popular but potentially necessary measure is to reduce Malaysia’s export prices to avert a substantial decline in US demand.
Without any government response, Malaysia’s GDP, which is heavily reliant on exports, might experience a downturn. Additionally, the Malaysian ringgit might depreciate further due to a fall in demand.
Source: https://www.businesstoday.com.my/2025/04/06/malaysia-must-act-to-safeguard-economy/