Economists Cautious On Malaysia’s 2025 Trade Prospects Amid Tariff Uncertainty
By Siti Noor Afera Abu
KUALA LUMPUR, June 22 (Bernama) -- Economists are maintaining a cautious stance on Malaysia’s trade outlook this year due to persistent global tariff uncertainty, which is expected to weigh on the country’s trade and manufacturing performance.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the evolving United States (US) trade tariff regime is poised to exert significant pressure on global trade dynamics, with notable implications for Malaysia’s export-driven economy.
He said that as a key player in ASEAN, Malaysia’s trade-dependent sectors such as electronics, palm oil, and manufactured goods face both challenges and opportunities amid these disruptions.
“While global trade is unlikely to collapse, a moderation in export volumes is anticipated, with the full economic impact becoming clearer within three months of tariff implementation,” he told Bernama.
Mohd Sedek said data from May 2025 illustrates early effects. Malaysia’s exports to the US declined by 2.8 per cent month-on-month to RM18.68 billion from RM19.22 billion in April, reflecting broader market adjustments.
Among Malaysia’s top 10 export destinations, only four -- China, the European Union, Taiwan, and Vietnam -- recorded month-on-month export growth, underscoring uneven trade resilience.
“This aligns with global trends, as rising geopolitical frictions, particularly US-China trade tensions, prompt supply chain reconfigurations, including re-shoring (bringing production back to domestic markets), friend-shoring (relocating to allied nations), and near-shoring (shifting to geographically proximate countries),” he explained.
According to the Ministry of Investment, Trade and Industry (MITI), Malaysia's trade increased by 2.6 per cent in May 2025 to reach RM252.48 billion, marking the 17th consecutive month of year-on-year growth since January 2024.
In a statement today, it said exports moderated 1.1 per cent to RM126.62 billion, while imports grew 6.6 per cent to RM125.86 billion. Trade surplus for the month stood at RM766.3 million, marking the 61st consecutive month of trade surplus since May 2020.
Malaysia’s Edge in ASEAN Supply Chain Realignment
Mohd Sedek said Malaysia’s strategic position within ASEAN positions it as a potential beneficiary of the shifts in production base.
The region’s growing role as a hub for friend-shoring and near-shoring, driven by its proximity to major markets like China and its relatively stable political environment, enhances Malaysia’s appeal as an alternative manufacturing base.
“For instance, multinational corporations seeking to diversify away from China due to tariffs or geopolitical risks are increasingly eyeing ASEAN nations.
“Malaysia’s robust electronics sector, which accounts for approximately 40 per cent of its exports, stands to gain from such reconfigurations, particularly as firms relocate semiconductor and component manufacturing to Penang and Johor,” he said.
Moreover, Malaysia is leveraging its ASEAN membership to bolster trade diversification.
The Regional Comprehensive Economic Partnership (RCEP), which includes ASEAN and major economies like China, Japan, and South Korea, provides Malaysia with access to a market of 2.2 billion consumers, cushioning the impact of US tariffs.
“These gains reflect Malaysia’s proactive pivot towards emerging markets, reducing reliance on traditional partners like the US,” he said.
Tapping Semiconductor Growth Through Strategic Position
Meanwhile, Mohd Sedek said, Malaysia can ride on the projected 12.5 per cent growth in global semiconductor sales by leveraging its strategic ASEAN position and aligning with friend-shoring trends.
Deeper integration under RCEP and strengthened partnerships with Singapore and Vietnam will reinforce regional supply chain resilience.
He advised that to attract firms shifting from China, Malaysia should build on the RM83 billion in electrical and electronic (E&E) foreign direct investment secured in 2024 and offer targeted incentives.
Moving up the value chain into chip design and fabrication, backed by institutional support and workforce upskilling, is essential, he said.
“Although a potential 10 per cent US tariff may dampen exports and gross domestic product, diversifying into markets like India and Saudi Arabia, alongside investments in green manufacturing, Industry 4.0, and a gradual shift towards Industry 5.0, will position Malaysia as a neutral, high-tech hub in an increasingly fragmented global trade landscape,” he added.
According to MITI, exports of E&E products continued to be resilient, registering an increase of nearly RM4 billion in May -- consistent with the World Semiconductor Trade Statistics forecast of an 11.2 per cent increase in global semiconductor sales in 2025.
Echoing Mohd Sedek, RHB Investment Bank Bhd anticipates a slowdown in trade momentum as the effects of front-loading activities have dissipated.
The investment bank said in the event of renewed tariff tensions following the expiration of the tariff pause, sectors heavily reliant on demand from the US and China -- as well as those with strong export orientation, such as E&E, crude materials, and machinery -- are expected to bear the brunt of both direct US tariffs on Malaysia and broader spillover effects from ongoing trade tensions.
“Furthermore, potential slower growth in major economies and lingering uncertainties over tariff tensions (especially after the pause period) pose significant downside risks to Malaysia’s trade and growth outlook, reinforcing our cautious stance,” it added.
-- BERNAMA