Rakuten Trade's Lau said the impact of any US trade tariffs on local manufacturing players should be minimal.
PETALING JAYA: Analysts are cautiously optimistic about the outlook for the local manufacturing sector, buoyed by the growth momentum of the country from 2024 but they are uncertain about the effects of US President Donald Trump’s message to impose “reciprocal tariffs”.
BIMB Securities is expecting Malaysia’s industrial production index (IPI) and manufacturing sales to grow at a steady but moderate pace, driven by domestic stability.
Citing data from the Statistics Department, the research house said manufacturing sales hit RM1.9 trillion in 2024, rising 4.6% year-on-year (y-o-y) with December sales at RM158.4bil, signalling stability amid external headwinds.
“As we look ahead to 2025, Malaysia’s manufacturing sector faces mounting uncertainties, driven by geopolitical risks, evolving trade policies, and potential supply chain disruptions.
“Although Malaysia’s export sector may not be directly affected by US protectionist measures – given the relatively modest US trade deficit with Malaysia – the indirect spillover effects through key trade partners, particularly China, and a potential slowdown in regional demand could be significant,” it said in a note to clients yesterday.
BIMB Securities said this would especially be pertinent for the electrical and electronics (E&E) sector, adding that a shift toward protectionist policies could intensify US-China trade frictions, thereby jeopardising Malaysia’s strategic position within China-centric supply networks.
The research house said given Malaysia’s deep trade ties with China, the former’s economic trajectory remains closely linked to the latter’s growth prospects, while in the recent pause in tariffs targeting Canada and Mexico would add to policy unpredictability, creating a volatile external environment for Malaysia’s export-driven industries.
According to head of equity sales at Rakuten Trade Vincent Lau, the impact of any US trade tariffs on local manufacturing players should be minimal, because their share of exports to the United States is limited and their exports are heavily skewed towards downstream products.
“Our channel checks with a number of manufacturers, including companies such as Press Metal
Aluminium Holdings Bhd and Main Market-bound Pantech Global Bhd, reveal that they are unperturbed about the tariffs because their exports are value-added downstream goods, or that their export volume to the United States is not too significant,” he told StarBiz.Besides, he pointed out that tariff threats between China and the United States have not resulted in a panic but there have been mini rallies in stock exchanges across Hong Kong and China over the past week.
On the flipside, Lau said the upcoming implementation of targeted subsidies for RON95 fuel may have an effect on certain pockets of the manufacturing industry, as consumers are likely to feel the pinch and refrain from spending on big ticket items such as premium vehicles.
Consumers could be on the lookout for more fuel-efficient and affordable vehicles such as those produced by Perusahaan Otomobil Kedua Sdn Bhd would be more attractive compared with more expensive B-segment and C-segment cars.
While remaining cautious about how the tariff debate could play out, especially with Trump yet to meet China president Xi Jinping, Lau is confident global manufacturers will continue to look for alternatives to China to set up shop in the current environmen.
BIMB Securities concurred with Lau, noting that Malaysia is well-positioned to capitalise on shifting global trade dynamics, especially as multinational corporations diversify production away from China to mitigate geopolitical risks.
“Malaysia stands to attract increased foreign direct investment, strengthening its manufacturing base and enhancing trade competitiveness.
“The E&E sector, a key driver of Malaysia’s industrial growth, is poised to benefit from this realignment,” it said.
Moreover, the research house said in the medium term, China’s evolving trade and industrial strategies present additional opportunities for Malaysia, because as Chinese firms seek to diversify their manufacturing bases to circumvent geopolitical restrictions, Malaysia’s well-established expertise in high-value manufacturing would position it as a strategic beneficiary of supply chain realignments.
“Overall, Malaysia’s manufacturing recovery in 2025 will depend on global demand, domestic support, strengthening global demand and sustained domestic momentum,” it said.
