GEORGE TOWN, April 8 — A 24 percent tariff imposed on exports to the US might diminish Malaysia’s appeal for upcoming foreign direct investments (FDI), stated InvestPenang, which handles investment promotions for the Penang state administration.
They mentioned that the tariff conveys a negative message to potential investors who might view Malaysia as being less competitive for exports when compared to nations enjoying favorable trade conditions.
"This could lessen Malaysia's appeal for upcoming foreign direct investment, especially in advanced manufacturing industries," they stated in a release made public today.
They additionally mentioned that export-focused firms are considering changes in their supply chains, such as moving production to nations with reduced tariff risks and transferring parts of their operations to the United States.
"Local Malaysian ATE firms exporting to the U.S. are currently assessing the viability of setting up end-stage module assembly lines within the country to avoid significant tariff hikes and sustain their market presence," they stated.
It was mentioned that multinational corporations (MNCs) currently operating in Mexico are also contemplating moves to shift their production to Mexico because of the US-Mexico-Canada Agreement (USMCA).
The USMCA, which permits 0 percent tariffs on eligible products, places Mexico at an advantageous position amid these changing trade dynamics.
"Goods that do not comply with regulations currently have a 25 percent tariff, however, this rate is anticipated to decrease to 12 percent if the current fentanyl/migration IEEPA orders are revoked," they explained.
InvestPenang also highlighted growing concerns about the possible influx of surplus stock from nearby nations into Malaysia’s local marketplace.
This might undermine local producers, especially small and medium-sized enterprises, and disrupt market pricing.
"Leaders in the industry caution about increasing inflationary pressures, possible decline in manufacturing activities, and upcoming job losses if the tariff problem is not quickly resolved," they stated.
It was mentioned that competition from ASEAN nations and India remains relatively mild, but should the trade talks between Vietnam and the U.S. yield positive results, this could reshape regional competitiveness and affect upcoming investment trends.
"Stakeholders from various industries are urging the Malaysian government to promptly engage in bilateral talks with the U.S. administration," they stated.
It was suggested that there should be a firm push for negotiating tariff cuts, along with keeping an eye on discussions with rival markets like Mexico, Costa Rica, Poland, and Ireland.
"This step is considered essential for maintaining the competitiveness and sustainability of Malaysia’s industrial foundation," they stated.