Malaysia is pushing to reduce tariffs on its exports to the United States. Prime Minister Anwar Ibrahim told parliament on Monday that the U.S. has agreed to continue discussions. He described the negotiations as still early but noted they show progress.
The United States proposed a 24% tariff on certain goods from Malaysia beginning in July. This would increase the price of Malaysian goods in U.S. markets and make them less competitive. Anwar said that although the discussions were still preliminary, U.S. authorities had agreed to continue talks with Malaysia and that the mutual tariff could be lowered.
He added that the overall economic impact is still containable for now because the majority of tariffs have been waived until July.
But if Malaysia fails to secure a deal before July, its exports could be dealt a significant blow. Anwar said the government is also willing to listen to U.S. concerns. Among the wrinkles are non-tariff barriers and Malaysia’s trade surplus with the United States.
Malaysia is also open to a new bilateral trade agreement with Washington.
Rising tariffs drag down Malaysia’s economy
The proposed U.S. tariffs are part of a broader protectionist strategy by President Donald Trump’s administration, which has also imposed similar measures on other trading partners, including China and Mexico. These tariffs have raised concerns among global economies, particularly in Southeast Asia, where countries like Malaysia rely heavily on exports.
Malaysia’s economy is getting scorched by the global trade war. The country had previously projected to grow by 4.5% to 5.5% this year. Now, the government has acknowledged it won’t get to that target.
Anwar informed lawmakers that global trade standoffs were making it difficult to meet earlier forecasts.
This sentiment was also echoed recently by the Governor of Bank Negara Malaysia (BNM), Malaysia’s central bank. He also said that economic growth projection may have to be revised because of a deteriorating global economy.
The economy depends on exports, which are weighed down by weak growth in top trade partner China. Malaysia’s homegrown industries suffer when global demand drops or tariffs go up.
The manufacturing industry, in particular, is at risk. It accounts for a significant share of Malaysia’s exports to the United States and China.
The government intends to prop up local industries and seek out new markets to cushion the blow.
Malaysia ramps up regional and global trade ties to offset U.S. tariff risks
Economists have remained cautiously optimistic about Malaysia’s export outlook, pointing to the strong performance in some key sectors such as electrical and electronics (E&E) and palm oil. Malaysia’s exports amounted to RM118. 26 billion, up 6.2% from the same period last year. Even so, economists say ongoing trade tensions may weigh on the country’s economic expansion prospects.
The International Monetary Fund (IMF) has warned that retaliatory tariffs threaten Asia’s growth and disrupt supply chains. For 2025, the IMF’s World Economic Outlook projects a world economic growth of 3.2%, and in the case of Asia, this growth is anticipated to be a little higher at 4.4% in the same period.
Malaysia is now moving to improve relations with other global players. Anwar said the country will “aggressively pursue” fresh trading avenues. That includes increased trade with China and the European Union.
He also said Malaysia will try to upgrade its Southeast Asian trade. Malaysia is the chair of the Association of Southeast Asian Nations (ASEAN) this year. This, for Anwar, is an opportunity to head regional dialogue on improved economic cooperation.
Ministers from ASEAN and China will meet on May 19. The aim is to complete updates to the ASEAN-China Free Trade Agreement. Such changes would result in lower tariffs and quicker customs clearance between the two areas.
Malaysia wants to grow so that it does not need to rely on one market. The impact of escalating tariffs has been debilitating in countries all over the region, from Southeast Asia to the Pacific. Six of ASEAN’s 10 member countries face 32% and 49% U.S. levies.
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