United States contemplating imposition of tariffs on semiconductor exports to Malaysia
In a recent ministerial statement, Tengku Zafrul expressed concerns about changes in US trade policies, specifically the implementation of tariffs on electrical and electronic goods. As of early August 2025, Malaysian semiconductor exports to the US remain exempt from the 19% reciprocal tariff set to take effect on August 8.
This temporary relief is a significant development for one of Malaysia’s key export sectors. The US enacted high reciprocal tariffs (averaging around 19%) on imports from several countries, including Malaysia, primarily targeting electrical and electronic goods, pharmaceuticals, and semiconductors. However, ongoing negotiations and compliance with US security and economic criteria have led to exemptions or delayed tariff imposition for certain partners, such as Malaysia for semiconductors.
The potential impact on Malaysian jobs and economy from these tariffs is still uncertain but could be significant. Given Malaysia's substantial reliance on electrical and electronic exports—especially semiconductors—a full 19% or higher tariff could increase costs for US importers, disrupt supply chains, and potentially reduce Malaysian export volumes, thereby affecting employment in those sectors.
The US government is selectively applying tariffs and adjusting rates in response to trade negotiations and national security commitments. Thailand, Indonesia, and the Philippines were also hit with a 19% tariff rate, while Vietnam faces a slightly higher rate of 20%.
Malaysia and the US are still working towards an agreement on a joint statement that includes mutually agreed commitments. Tengku Zafrul has emphasized that the US is Malaysia's largest export destination and one of the nation's main sources of foreign investment last year. He also warned that the US could impose additional tariffs on grounds of national security.
Despite the current exemption, Tengku Zafrul believes a "reasonable outcome" was achieved in negotiations with the US, despite hopes for a lower tariff rate. He mentioned that the US government is investigating whether extensive foreign imports of pharmaceuticals and semiconductors pose a national security threat. If these imports are deemed a threat, it could potentially expand the tariffs to other sectors, posing a significant risk to the Malaysian economy.
Malaysia is the world’s sixth-largest semiconductor exporter, and the sector contributed significantly to the nation's economy, with E&E exports surpassing RM600 billion last year. Tengku Zafrul has stated that approximately 100,000 workers in Penang and Kedah could potentially lose their jobs due to reduced demand for electrical and electronic goods in the US.
In conclusion, while Malaysian semiconductor exports are currently exempt from the specific 19% tariff related to US national security concerns, ongoing tariff policies pose a potential risk to Malaysian jobs and economy if exemptions are withdrawn or expanded tariffs applied to other sectors like pharmaceuticals and electrical goods. The situation remains fluid pending further U.S.-Malaysia negotiations and specific tariff implementations.
- Malaysia's government is closely monitoring the implementation of US trade policies, particularly the tariffs on electrical and electronic goods, due to its significant reliance on these exports.
- In light of the US government's selective application of tariffs, the Malaysian finance minister, Tengku Zafrul, has emphasized the potential impact on jobs and the economy from these tariffs, especially considering Malaysia's position as one of the world's largest semiconductor exporters.
- The ongoing negotiations between Malaysia and the US are crucial, as they could lead to agreements that protect Malaysia's key export sectors, such as the semiconductor industry, from the potential expansion of tariffs into other sectors like pharmaceuticals and electrical goods, which could pose a significant risk to the Malaysian economy.
