US tariff cut seen supporting Malaysia's macroeconomic normalisation by 2H 2026

KUALA LUMPUR: The reduction of the tariff rate to 19 per cent on Malaysian exports to the United States, from 25 per cent previously, is expected to lead to the country's macroeconomic normalisation by the second half of 2026, barring external shocks.

AI Brief

Malaysia is taking a more assertive stance in trade, focusing on long-term resilience over short-term relief.
Export growth is expected to slow in 2025 due to weak global demand despite tariff relief.
The tariff deal may boost foreign investment in key sectors like semiconductors, agrifood, and minerals.

In looking ahead to Budget 2026 and ongoing fiscal reforms, Kenanga Investment Bank Bhd (Kenanga IB) said the deal marked a shift in Malaysia's economic diplomacy, with the country seen as "more assertive, less reactive and focused on long-term resilience over short-term relief."

"In the medium term, we maintain a neutral trade outlook, with global demand softness and external uncertainties likely capping gains," it said in a note today.

Kenanga IB said the export forecast for 2025 is retained at 3.1 per cent from 5.7 per cent in 2024, reflecting a weakness in commodity exports. The tariff reprieve reduces risks, but demand remains the limiting factor, it added.

It reckons that the new tariff deal may attract foreign direct investment, particularly in strategic sectors such as semiconductors, agrifood, and minerals. It also reinforces Malaysia's role in US-aligned critical mineral and rare earth supply chains.

For the trade outlook, "despite easing trade tensions and the recent US tariff rollback, Malaysia's export outlook remains tempered by global policy uncertainty and a patchy US and China recovery," it added.

-- BERNAMA