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AmBank Group chief economist Firdaos Rosli.
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PETALING JAYA: An economist has cautioned that Malaysian exporters shipping products to the United States face the risk of “reverse tariff” effects that may erode producer surplus.
AmBank Group chief economist Firdaos Rosli said in a report that the US’ abrupt deployment of reciprocal tariffs could give rise to “reverse tariff” effects, where exporters may be forced to absorb cost pressures to maintain market access.
“Although almost all major US trading partners are hit by higher tariffs, the 19% reciprocal tariff imposed on Malaysia poses significant challenges.
“Our analysis shows that 53.9% of Malaysia’s exports to the United States are subject to reciprocal tariff,” he said in a second-half outlook report titled “Unchartered territory”.
Growing anecdotal and empirical evidence suggests that US importers are bearing a significant portion of the burden from reciprocal tariffs.
Firdaos said numerous US-based news reports have highlighted instances of importers renegotiating prices with overseas suppliers.
“Meanwhile, exporters will likely face downward pricing pressure from US buyers seeking to offset tariff-related cost increases.
“Based on our understanding of reciprocal tariffs, the new tariff does not replace the prevailing tariff rate but acts as a top-up. A closer look at the tariff structure reveals reciprocal tariffs’ compounding effect.”
For instance, printed circuit assemblies (HTSUS code 8473.30.11) carries a prevailing tariff of 0%, but is now subject to a full 19% reciprocal tariff, significantly raising its landed cost to 19%.
Similarly, other electrical machines and apparatus (HTSUS code 8543.70.98), accounting for 2.1% of imports, face a combined tariff of 21.6% (19% reciprocal tariff plus the prevailing 2.6%).
Despite the trade challenges, Firdaos noted that Malaysia’s competitive advantage remains intact, as the reciprocal tariff exposure is lower than China’s but comparable to regional peers.
In 2024, the value of US imports from Malaysia stood at US$52.53bil.
Of this amount, about 46.1% are exempted from the 19% reciprocal tariff, which began in August this year.
AmBank’s findings suggest that most of Malaysia’s high-value electronics and semiconductor components remain shielded from retaliatory tariffs, at least for now.
The list of these items is smaller but much larger in value. Electronic integrated circuits, particularly processors and controllers, are leading the list, which alone account for US$3.62bil in exempted US imports from Malaysia.
“We note that many exempted items are made by American multinational corporations operating in Malaysia. However, not all electrical and electronics or semiconductor-related imports are exempt from reciprocal tariffs.
“The top 10 items include niche electronics and consumer tech accessories, as well as rubber gloves.
“Notably, solar cells and photovoltaic modules collectively represent a substantial portion of the reciprocal tariff-affected imports,” stated Firdaos.
Separately, on the economy, Firdaos expects the nation’s growth to moderate in the second half of 2025 (2H25).
The good news is he does not foresee a sharp downturn.
AmBank forecasts the 2025 gross domestic product (GDP) to grow by 3.8%, slightly below Bank Negara Malaysia’s (BNM) forecast range of 4% to 4.8%.
Household consumption, accounting for over 60% of GDP, remains a key anchor, supported by rising tourist arrivals and robust construction activity.
The fiscal deficit target remains achievable despite softer nominal GDP growth.
The debt-to-GDP ratio is expected to edge higher, driven more by base effects than steeper borrowings.
Labour market conditions remain tight, with unemployment at 3%, the lowest since April 2015. However, subdued inflation and low spending propensity may dampen growth.
“We expect inflation to rise in 2H25, driven by potential adjustments to RON95 fuel and electricity prices, which account for 8.2% of the inflation basket.
“The recent expansion of the sales and service tax (SST) may pressure food inflation, even if staple subsidies continue.”
Headline inflation in Malaysia had been moderating through 1H25 before edging higher in July, following the SST expansion.
“In light of the subdued inflation in 1H25 and our expectation for only a modest pickup in 2H25, we expect full-year inflation to average 1.5%, at the lower bound of BNM’s forecast range of 1.5% to 2.3%,” according to Firdaos.
Disclaimer
The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile. The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, Bond and Sukuk Information Platform Sdn Bhd (“the Company”) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
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