Malaysia is at risk of losing its export market to the United States (US) due to competition from other countries that enjoy lower tariff rates, according to the World Bank.
The World Bank’s Chief Economist for Malaysia, Dr Apurva Sanghi, said nearly 60% of Malaysian goods exported to the US are currently subject to a 19% tariff, while many competing countries enjoy lower tariff rates.
He added that the electrical and electronics (E&E) and semiconductor sectors, which are the backbone of the country’s exports, are the most vulnerable to the impact of the tariffs, although the majority of E&E products still enjoy exemptions.
The E&E sector accounts for about 55% of Malaysia’s total exports to the US, making any change in tariff policy highly impactful for the country’s economy.
According to the World Bank, Malaysia currently has the highest exposure among ASEAN countries to the risk of new US tariffs on the E&E sector, compared to the Philippines, Thailand and Vietnam.
More worryingly, although Malaysia has received some spillover benefits from the trade shift away from China, Vietnam and Thailand are seen to gain much more.
Apurva explained that this trend reflects long-term structural risks in the Malaysian E&E sector, including declining market share of high-tech integrated circuit (IC) chips and still low research and development (R&D) spending.
