Tariffs cuts possible after Malaysia, US begin talks - Economist

KUALA LUMPUR: Zero or reduced reciprocal tariffs for Malaysia could emerge as one of the key positive outcomes from the recent (Apr 24) discussions by Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz with the United States Trade Representative (USTR), Jamieson Greer.

AI Brief

A 90-day pause on US tariffs gives Malaysia a chance to negotiate better trade terms, aiming to reduce or remove the 24 pct reciprocal tariff.
Malaysia is engaging with the US on four key issues - trade deficit, non-tariff barriers, tech safeguards, and a bilateral trade deal - to find common ground.
As ASEAN chair, Malaysia can push for regional trade talks with the US and explore tech agreements to protect supply chains and boost exports.

Economist Professor Dr Geoffrey Williams said the recent 90-day pause presents a window of opportunity for Malaysia to negotiate better trade terms, potentially boosting the country's global trade competitiveness.

"The executive order signed by US President Donald Trump on Liberation Day explicitly allows for negotiations that could lead to the reduction or removal of the reciprocal tariffs, and this is what the US has been promising and promoting.

"If the outcome is successful and a commitment to reduce or remove both tariffs and non-tariff barriers is achieved, then the reciprocal tariffs can be lifted or reduced," he told Bernama.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid also sees the possibility of securing an exemption or lower tariff following the talks, as Malaysia continues its diplomatic efforts on the matter.

"Given that the current reciprocal tariff is 24 per cent, while Malaysia's average tariff based on World Trade Organisation (WTO) data is 5.6 per cent, we might reach a compromise in between - or potentially receive exemptions," he said.

He noted that Malaysia remains committed to fair bilateral trade with the US and is keen to see the trade balance between the two countries move towards a more favourable trajectory.

On April 2, 2025, the US President announced a series of reciprocal tariffs affecting multiple countries, including a 24 per cent tariff on Malaysian goods, which is currently on pause.

Apart from Greer, Tengku Zafrul also met Secretary of Commerce Howard Lutnick in Washington, DC, on Thursday to discuss trade-related issues.

According to the Ministry of Investment, Trade and Industry (MITI), Malaysia stands ready to continue working with the US towards mutually agreeable solutions on the reciprocal tariff issue announced by Trump's administration.

Malaysia has indicated its willingness to negotiate with the US on four key areas: reducing the trade deficit, addressing non-tariff barriers, strengthening technological safeguards and security, and exploring a potential bilateral trade agreement.

Addressing US Concern

MITI also noted that Malaysia will seek alternative approaches to address the US's concerns, while ensuring that mutually beneficial trade continues.

UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said that with Malaysia chairing ASEAN this year, it is well-positioned to lead the US-ASEAN trade dialogue to address bilateral concerns within a regional framework.

"This platform would facilitate discussions on market access, tariff relief and trade liberalisation, leveraging ASEAN's US$3.1 trillion market to find balanced solutions.

"This not only reduces trade tensions but also enhances US-ASEAN economic ties and reaffirms Malaysia's status as a trusted global trade partner," he said.

Besides, he said there are other alternative ways for Malaysia to address US concerns, with one promising approach being a targeted Technology Safeguards Agreement focused on semiconductors, aerospace, and digital economy sectors.

"Such an agreement would strengthen intellectual property protections and secure critical supply chains, meeting US priorities while advancing Malaysia's National Semiconductor Strategy," he added.

The US remains Malaysia's second-largest export destination, accounting for 13.2 per cent of total exports in 2024.

According to Malaysia's Trade Performance report, trade with the US rose by 29.9 per cent in 2024 to RM324.91 billion compared to 2023.

Trade with the US accounted for 11.3 per cent of Malaysia's total trade, with exports to the US in 2024 reaching a new record high, surging 23.2 per cent to RM198.65 billion.

-- BERNAMA