U.S. Tariff Threats Cloud Malaysia’s 2025 Trade Outlook

(MENAFN) Economists are warning that Malaysia's near-term export prospects remain uncertain, as escalating concerns over U.S. tariffs cast a shadow—even as the country's exports rose 3.8% year-on-year in the first half of 2025.

In a note issued last Friday, UOB Global Economics and Markets Research stated that Malaysia’s export trajectory continues to face headwinds due to unresolved global trade and tariff disputes, persistent geopolitical tensions, and shifting domestic policy reforms.

"The fourth month of contraction in imports of intermediate goods and sluggish business sentiment also presage weaker manufacturing and export activities in the foreseeable future," said the research firm.

Despite these challenges, UOB has kept its full-year export growth projection for 2025 at 3.8%, while emphasizing its ongoing surveillance of external factors—especially U.S. tariff policies and possible countermeasures from other key economies.

Echoing similar concerns, MBSB Research projected in its own note that Malaysia’s export growth will likely decelerate to 2% in 2025, citing persistent trade uncertainties.

"Ahead of the Aug. 25 tariff deadline, export growth may pick up due to front-loading activities, though the boost could be limited," said the research house.

MBSB pointed out that the proposed 25% U.S. tariff rate on Malaysian goods—still under negotiation—is steeper than those faced by regional competitors such as Indonesia and Vietnam. This disparity could undermine Malaysia’s export competitiveness in the U.S. market.

The research firm noted that positive outcomes from ongoing trade talks could help Malaysia maintain its edge.

"Softer demand from key partners, however, continues to pose downside risks to Malaysia's trade outlook, while sustained import growth may narrow the trade balance temporarily in the near term," it added.

MBSB highlighted that continued declines in mining exports are weighing on overall performance, though gains in electrical and electronics (E&E) products and palm oil offer some offset.

"Ongoing efforts to diversify export markets and strengthen bilateral trade ties are expected to cushion tariff impacts on trade with the United States," the firm added.
"We expect Malaysia's growth will continue to be supported by resilient domestic consumption."

Meanwhile, in a note published Monday, Maybank Investment Bank said that Malaysia’s latest external trade data underscores the push and pull between internal economic drivers—particularly a domestic investment rebound—and mounting external challenges tied to unresolved U.S.-Malaysia trade talks.

"Malaysia's external trade outlook is dependent on the outcome of U.S.-Malaysia trade negotiations ahead of the Aug. 1 deadline, when the country-specific 25 percent reciprocal tariff kicks in, plus the overhangs in product-specific tariffs by the United States, especially on semiconductors," the firm stated.

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