PETALING JAYA: With strong domestic demand and continued public and private investments, the country is expected to weather external headwinds despite potential risks posed by global trade tariff measures.
Malaysia would to benefit from trade diversions triggered by recent tariff developments, particularly those involving the United States and China.
The country’s gross domestic product (GDP) growth for 2025 was projected at 4.9% supported by higher civil wage hikes, an increase in the minimum wage, expanded cash transfers of RM13bil in 2025 against RM10bil in 2024, a robust labour market, and steady pipeline of investments benefiting from government’s incentives packages, according to Hong Leong Investment Bank (HLIB) Research.
These factors were expected to act as buffers against external economic shocks, ensuring a stable growth trajectory.
Malaysia’s GDP grew 5.1% in 2024.
US President Donald Trump had introduced a 10% tax on Chinese imports in the latest round of measures.
While some countries faced direct challenges, HLIB Research said “Asean countries, including Malaysia, are well-positioned to capitalise any trade diversion, akin to Trump’s first-term.”
Historical precedent suggested that Malaysia could see benefits similar to those during his first term from 2017 to 2021, when its exports to the United States grew at a compound annual growth rate (CAGR) of 4.6%.
Vietnam, a key beneficiary of the US-China trade war, saw a more pronounced CAGR of 15.9% during the same period.
Industries poised to gain from these shifts included those producing “toys, sporting goods (66.5% US import dependency on China), and cell phones and appliances (57.3%).”
This indicated that export-driven sectors in Malaysia could leverage new opportunities arising from the latest trade measures.
Asean economies, as a whole, were seen as being in a favourable position to take advantage of the ongoing realignments in global trade flows.
At the same time, the United States had also taken a broader approach to addressing trade imbalances.
Trump signed a memorandum calling for “fair and reciprocal” tariffs, which directed a country-by-country review of trade relationships.
While the overall tariff gap between the United States and Malaysia was estimated at 2.3%, HLIB Research noted that “although reciprocal tariffs could generate revenue for the United States, the impact is limited, contributing just 0.2% of US GDP and only 0.002% from Malaysia.”
This suggested that Malaysia was not a prime target for major tariff action but warranted ongoing monitoring for potential shifts in policy.
A key risk remained the possibility of a universal 10% tariff on all imports, though this was not the research house’s base case scenario.
“Given his unpredictable trade stance, the risk of a blanket 10% universal tariff is not entirely off the table,” it cautioned. The imposition of such a measure would necessitate closer scrutiny of US trade policies and their potential repercussions on Malaysia.
