by Tan Aik Keong (AK)
The Trump administration's announcement of a 24% retaliatory import tariff on goods from Malaysia has sent a real shock through the local economy — and the tech sector, one of our strongest performers in recent years, sits squarely in the blast radius. As a key pillar of Malaysia's exports, tech is first in line to feel rising costs and eroding competitiveness.
Worth noting: the tariff rate varies sharply across Southeast Asia — Cambodia at 49%, Laos 48%, Vietnam 46%, Myanmar 44%, Thailand 36%, Indonesia 32%, Malaysia and Brunei at 24%, the Philippines 17%, Singapore 10%. Malaysia sits roughly in the regional middle — not the worst hit, but a 24% cost increase is still a serious hit to local exporters' margins.
Semiconductors exempt for now — but not guaranteed to stay that way
Malaysia's tech exports to the US are substantial, concentrated heavily in electronics and semiconductors. Chips, LED components, microcontrollers and similar products are currently explicitly exempt, which helps our semiconductor industry in the short term. But US officials have recently signalled they haven't ruled out a separate tariff specifically targeting semiconductors down the line — casting real uncertainty over the sector's longer-term outlook. Non-exempt electronics and communications hardware, on the other hand, face the 24% tariff immediately, putting real pressure on near-term export orders and margins, and potentially pushing multinationals to reconsider where they base production.
Software and services aren't hit directly — yet
Compared to physical tech products, software, AI and digital services haven't faced a direct tariff hit so far. But if US-Malaysia relations stay tense, it wouldn't be surprising to see the US introduce further restrictions targeting data security or tech services down the road — a long-term risk that shouldn't be dismissed.
Supply-chain ripple effects
This tariff shock also creates near- and long-term supply-chain challenges for Malaysia's broader digital economy. Local companies may be pushed to shift supply chains toward lower-tariff destinations (the Philippines, for instance), or set up small-scale production bases within the US itself. Either adjustment is expensive, and hard to pull off quickly.
Even so, Malaysia's market reaction has been fairly measured — the stock market's decline has been limited, and glove-sector stocks have even rebounded. Facing this, government and businesses need to actively pursue ASEAN, EU, Middle East and African markets to reduce over-reliance on the US. At the same time, we should double down on industrial upgrading — using the digital economy and Industry 4.0 to accelerate product development and innovation, lifting overall competitiveness to protect the tech sector's long-term sustainability.
This sudden shift in US trade policy is a real challenge — but it's also an opportunity to push Malaysia's economy away from single-market dependence and toward a higher-value-added industrial structure.
Part of the AK AI Corner column. Originally published in Oriental Daily (东方日报) on Apr 3, 2025.