News Analysis: Increased tariffs will strain Malaysia-U.S. ties, disrupt trade links

Malaysia Sun

09-07-2025

by Jonathan Edward, Wang Jiawei
KUALA LUMPUR, July 9 (Xinhua) -- Bilateral ties between Malaysia and the United States are likely to be strained following the U.S. administration's imposition of a 25 percent tariff on Malaysian exports, according to analysts.
Noting that Malaysia has limited leverage against the unilateral decision by the U.S., they urged the country to deepen ties with other key trade partners and build economic resilience against such external disruptions, as the tariffs and other disruptive policies are likely to persist as a long-term trend.
Economist Samirul Ariff Othman told Xinhua that although Malaysia has avoided emotional retaliation, continued provocation or further economic pressure may leave the government with no choice but to adopt a tougher stance.
"Quiet diplomacy can only go so far. Should the U.S. persist, Malaysia will need to recalibrate its strategic alignments," he said.
Khazanah Research Institute Deputy Director of Research Yin Shao Loong said that the tariffs seem to be driven more by the U.S. administration's failure to meet its own deadlines for tariff negotiations, and that negotiations are likely to continue and eventually make headway.
Meanwhile, Federation of Malaysian Manufacturers President Soh Thian Lai said that the latest round of tariffs risks destabilizing business links and supply chains with feedback from manufacturers during the initial implementation of the 10 percent tariff already pointing to serious concerns over the sustainability of export operations.
"This latest escalation risks further destabilizing an already fragile industrial landscape, severely impacting export competitiveness and placing additional strain on manufacturers," he said.
Soh added that while strategic exports such as semiconductors were exempted, the broader ecosystem supporting the semiconductor industry including parts, machinery and services remains exposed to disruption.
The Institute for Democracy and Economic Affairs (IDEAS), a Malaysian think-tank, cautioned the government against accepting terms imposed by the U.S. that will be harmful to Malaysia's long-term strategic interests while stressing the need for a collective defense by the Association of Southeast Asian Nations (ASEAN) against disruptive policies.
"The underwhelming outcomes from bilateral negotiations for Malaysia and other countries reinforce the need for collective action to combat Washington's divide-and-conquer strategy. We can not allow fragmented engagement to weaken ASEAN's position on the global stage," it said in a statement.
"Malaysia must continue to avoid being drawn into retaliatory trade barriers or a false choice between major powers, and continue to diversify and deepen partnerships with countries that share its interest in open and mutually beneficial trade," it said.