Malaysia must brace for fjuture US tariffs, says US-Asean Business Council chief policy officer
KUALA LUMPUR: Malaysia must be prepared to negotiate the next wave of potential US tariffs targeting key strategic sectors and products such as semiconductors, technology products and pharmaceuticals, rather than focusing solely on negotiating reciprocal tariffs reductions currently with the United States.
US-Asean Business Council (US-ABC) executive vice-president and chief policy officer Marc Mealy warned that although the 50% tariffs on aluminium and steel may not severely affect Malaysia in the near term, future tariffs imposed under US national or economic security provisions could have a direct impact on Malaysian industries that are highly integrated into global supply chains.
'Steel and aluminium are not Malaysia's primary export sectors to the US, so these new (aluminium and steel) tariffs, which come into effect today (Wednesday), may not hit Malaysia as hard as they would some other countries.
'But we should be clear, there are other tariffs coming and when we talk about semiconductors, high-tech products, pharmaceuticals, the impact on Malaysia could be significant,' he told Bernama in an interview after appearing as a guest on Bernama TV's 'The Nation' programme hosted by Jessy Chahal.
Malaysia was hit with baseline and reciprocal tariffs totalling 24% on April 5, along with 168 other US trading partners, with tariffs ranging as high as 54% and a staggering 145% on China but which have now been reduced to 30%.
US President Donald Trump then paused the implementation of the tariffs for 90 days, which are supposed to end on July 8, but he moved forward to impose sectoral tariffs on aluminium and steel imports into the US.
In a further twist to the tariffs saga, a US Federal Court struck down most of Trump's tariffs, ruling them illegal, but the ruling has now been temporarily halted following an appeal by the Trump administration.
Mealy noted that under US law, additional tariffs could be imposed unilaterally by invoking national or economic security reasons, citing Section 232 of the US Trade Expansion Act, which opens the door for Washington to target sectors beyond those currently under reciprocal tariff negotiations.
'In the semiconductor space, Malaysia is globally competitive and that puts it directly in the line of sight for possible future US tariffs.
'So, when Malaysian officials, like Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, go to the US, I would expect them to raise this issue and start negotiating for exclusions or carve-outs in these areas,' he added.
The same concerns apply to Malaysia's medical devices and pharmaceutical exports, as these sectors could also fall under US scrutiny.
'Now is the time for Malaysia to reassess its domestic policies, particularly in key industries, and consider reforms to further strengthen investment appeal and mitigate potential fallout. Engage with the US government, but also look inward,' said Mealy.
'What changes can Malaysia make to enhance competitiveness? And as Asean Chair, Malaysia can lead the region to push for progress on initiatives like the Asean Digital Economy Framework Agreement – that will show global investors that this region is serious about future-proofing its economy.'
Mealy underscored that the US private sector remains deeply committed to Asean, with many American companies continuing to expand in Malaysia, particularly in the technology and medical sectors. 'The private sector sees value in Malaysia and Asean, but trade policy changes from Washington could complicate that, unless mitigated by smart diplomacy, reform and regional cooperation.'
Although Malaysia might not be severely impacted by the initial round of reciprocal tariffs – which could result in import duties of up to 24% on selected products – the real concern lies in future sectoral tariffs, that could reduce US demand for Malaysian exports.
'Even a 15 to 19% import tax can be a tipping point for an American buyer to source from another country,' Mealy said.
Mealy also pointed out that while some Asean countries may not complete negotiations within the current 90-day timeframe, he did not rule out the possibility of the US extending the pause or focus on select countries for deeper discussions.
'For Malaysia, which has been strategic and measured in its approach, this may work to its advantage. But the time to prepare for the next round of trade measures is now,' he said. – Bernama
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