[KUALA LUMPUR] Malaysia sees a possible reduction in United States tariffs on its exports as negotiations with Washington continue, but Prime Minister Anwar Ibrahim said on Monday (May 5) that unresolved trade tensions could weigh on the country’s economic outlook.
“Even though we are at an early stage of negotiations, the US government has agreed to continue talks with Malaysia and, if successful, there is a possibility of reducing the reciprocal tariffs,” Anwar told Parliament during a special session.
He noted that the suspension of most tariffs until July mitigated the immediate impact, but cautioned that Malaysia was unlikely to achieve its economic growth forecast of 4.5 to 5.5 per cent this year.
“The Ministry of Finance and Bank Negara are studying the impact of tariffs and will revise the gross domestic product growth forecast after there is more certainty on the US tariff policy and the outcome of negotiations with the US,” said Anwar, who also serves as finance minister.
The International Monetary Fund on Apr 23 lowered its real GDP growth outlook for Malaysia this year to 4.1 per cent, down from the 4.7 per cent it predicted in January.
Malaysia has also expressed its openness to negotiating non-tariff barriers with the US, reducing its bilateral trade surplus and exploring a bilateral trade agreement.
A NEWSLETTER FOR YOU
Friday, 8.30 am
Asean Business
Business insights centering on South-east Asia’s fast-growing economies.
In addition, Anwar noted that the government would pursue new trading opportunities and boost exchanges with established partners such as China and the European Union.
He indicated that negotiations aimed at improving the free trade agreement between the Asean regional bloc and China are nearing finalisation, with a meeting of trade ministers from the involved nations set for May 19.
On Apr 2, the US announced a 24 per cent tariff specifically on Malaysian goods, alongside a blanket 10 per cent duty on imports from all countries. While the country-specific tariffs have been suspended for 90 days to allow for negotiations, the global levy remains in effect.
Aid for tariff-hit SMEs
To cushion the blow, Malaysia will provide up to RM1.5 billion (S$459.6 million) in additional support to small and medium-sized enterprises (SMEs) affected by the US tariff regime.
The measures include RM1 billion in government guarantees under the Business Financing Guarantee Scheme to help SME exporters secure commercial bank loans, and RM500 million in soft loan facilities through development finance institutions.
These measures form part of a broader strategy to counter the US tariff policies, which the Malaysian prime minister described as unfair and lacking economic merit.
He rejected US claims that Malaysia imposes a 47 per cent tariff on American goods, calling the allegation “inaccurate and economically unsound”. He said Malaysia’s average tariff on US imports is just 5.6 per cent, and argued that the 24 per cent US retaliatory tariff is not based on credible calculations.
“The imposition of these tariffs is a blatant repudiation of the principles of non-discriminatory free trade enshrined under the World Trade Organization – an institution the US co-founded in 1948,” Anwar noted.
“It disregards the spirit of fair trade, long championed to prevent systemic imbalances that disproportionately burden developing countries in the Global South.”
The US is Malaysia’s largest export market, accounting for RM199 billion in exports and RM126 billion in imports in 2024, yielding a RM72 billion trade surplus. It is also Malaysia’s top foreign investor, with 974 approved projects worth RM166 billion since 1980, creating more than 200,000 jobs.
Prevent tariff evasion via transhipment
In a related move to ensure compliance with trade rules, Malaysia will tighten controls on export documentation to prevent tariff evasion via transhipment.
Starting May 6, the Ministry of Investment, Trade and Industry (Miti) will be the sole issuer of Non-Preferential Certificates of Origin (NPCOs) for shipments to the US – a role previously delegated to industry groups such as chambers of commerce and business councils.
The change is intended to curb the misuse of Malaysian ports as a transhipment point for goods from third countries, with officials citing concerns over false declarations of value or origin to bypass US tariffs.
“We reaffirm our unequivocal commitment to upholding the integrity of international trade practices,” Miti said in a separate statement. “The government views any attempt to circumvent tariffs through false declarations as a serious offence.”
Miti noted it will strengthen audits of NPCO applicants and work with the Royal Malaysian Customs Department to investigate and take enforcement action where necessary.
