SHAH ALAM - The ripple effects of United States (US) President Donald Trump’s import tariffs are set to strike a blow to Malaysia’s economy, particularly its export-dependent sectors.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said American tariffs could slash revenue and profits for Malaysian manufacturers, leading to layoffs and pushing inflation higher due to global trade disruptions.
He said in 2024, the US recorded a staggering trade deficit of USD1.2 trillion, which has fueled Trump’s argument that the US has been treated unfairly in global trade.
To correct this imbalance, the US government has imposed import tariffs that required Americans to pay additional charges for foreign goods.
"These policies aim to encourage domestic consumption of American-made goods and to bring more manufacturing and business operations back to US soil.
"Malaysia, being one of the US’ major trading partners, is likely to feel the impact," he said told Sinar Daily.
From Washington’s perspective, he said tariffs were a tool to correct what it saw as inequitable tariffs and non-tariff barriers imposed by other countries.
He said US hoped to achieve a balanced trade position, where exports matched imports.
However, Afzanizam said this American ambition came at a cost to its trading partners.
He pointed out that Malaysia exported RM198.6 billion worth of goods to the US in 2023, which made up 13.2 per cent of Malaysia’s total exports.
These exports were concentrated in Machinery and Equipment (65.7 per cent), Miscellaneous Manufactured Articles (22.4 percent) and Manufactured Goods (six per cent)—sectors that could see demand shrink rapidly.
"A decline in US import demand would directly affect Malaysian exporters, leading to reduced revenue and profits in the short term.
"Affected Malaysian companies may reassess their cost structures, with labour costs being one of the first areas of focus.
"This could lead to layoffs, particularly within Malaysia's manufacturing sector," he added.
He said these job cuts and declining exports would not be happening in isolation.
The complex structure of today’s supply chains where goods often passed through multiple countries before reaching their final destination meant that tariffs could lead to compounding costs.
Afzanizam emphasised that global trade tensions resulting from US tariffs could contribute to rising inflation.
"This complexity can drive up costs, which businesses may pass on to consumers.
"Efforts to reroute supply chains to circumvent tariff-related disruptions can add further costs, exacerbating inflationary pressures," he said.