PETALING JAYA: Malaysia’s exports will continue to grow after witnessing a higher trade surplus in 2024 and despite the renewed volatility and uncertainty brought on by the threat of tariffs from the United States and ongoing geopolitical risks.
Global demand would remain as the backbone of overall trade activity, as the International Monetary Fund expects global economic growth and global trade growth to be stable at 3.3% and 3.2% this year, respectively.
Last year, global economic growth and global trade stood at 3.2% and 3.4%, respectively. This should bode well for Malaysia’s export demand.
MARC Ratings Bhd chief economist Ray Choy told StarBiz the country’s international trade would likely continue to grow this year despite US President Donald Trump’s tariff threats.
“Historically, there was evidence of trade divergence to Malaysia when tariffs were imposed on China when Trump was also the US president back in 2018.
“Around 40% of Malaysia’s exports are in electrical and electronics (E&E), and 15% in commodities, suggesting the majority of Malaysia’s exports are in essential primary products.
“Given growth trends in semiconductors due to the artificial intelligence boom, Malaysia’s exports are part of the strategic global supply chain and demand for such products will remain robust,” he said.
MARC Ratings Bhd chief economist Ray ChoyMeanwhile, Choy said geopolitical risks remain contoured around China-US decoupling, strains in the US-Europe transatlantic alliance, and ongoing Middle East instabilities. Consequently, Asean has no specific strand of geopolitical tensions stemming from another major economic bloc, he noted.
RAM Rating Services Bhd head and senior economist Woon Khai Jhek said despite the renewed tariff threats and ongoing geopolitical risks, he expects the country’s international trade to continue growing this year, albeit at a moderate pace.
“A more moderate growth rate in 2025 is to be expected given the sharp recovery in growth rates in 2024 amid the low base effects from the preceding year.
“Gross export and import growth respectively rebounded to 5.7% and 13.2% in 2024, after contracting by 8% and 6.4% in 2023. As the upside support from low base effects subsides, the growth rate should also moderate accordingly in 2025,” he said.
He said Trump’s tariffs will create short-term headwinds, given the uncertainties and higher prices caused by the tariff rate hike would dampen demand and trade momentum.
RAM Rating Services Bhd senior economist and head of economic research Woon Khai Jhek
Woon, however, said impact could be moderated by the fact that such tariff threats are not new and corporations, to some extent, should be better prepared to handle such disruption compared to during Trump’s first term.
Bright spots can come from these tariffs or threats of it, he noted, due to Malaysia’s key role in the global E&E and semiconductor supply chains. He said these supply chains would continue to benefit from the semiconductor upcycle.
“Malaysia is also well positioned to benefit from a continuation of the China+1 strategy.
“We might see short-term disruption from the trade diversion and supply chain realignment, but over the longer-term, South-East Asian economies, including Malaysia, remain one of the key beneficiaries from more relocations,” Woon noted.
Malaysia’s trade recorded the 13th successive month of year-on-year growth in January 2025, rising 3.1% to RM241.95bil compared to January 2024, according to the Investment, Trade and Industry Ministry.
Exports grew for the fourth consecutive month, increasing by 0.3% to RM122.79bil, while imports rose by 6.2% to RM119.16bil. This resulted in a trade surplus of RM3.63bil, the 57th successive month of surplus since May 2020.
The export performance in January 2025 was driven by robust growth in key sectors, particularly manufacturing and agriculture.
Nomura Research’s recent estimates in its Asia Economic monthly publication earlier this month said Malaysia was the third most vulnerable to any imposition of US tariffs in the wider Asian region.
It said estimates of Asia’s ultimate exposure to the United States showed Vietnam would be the most vulnerable to higher US universal tariffs, followed by Thailand, Malaysia, Singapore and South Korea.
Any significant change in trade policy with the United States may happen in April, after thorough investigations that are now being carried out by the US government.
These include the America First trade policy memorandum signed by Trump on Jan 20 and the Reciprocal Trade and Tariffs memorandum signed on Feb 13.
The second memorandum would examine non-reciprocal trade relationships in a very broad sense, including not only tariffs but value added taxes, subsidies, digital trade barriers, intellectual property rights, regulatory requirements and exchange rate manipulation.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said Malaysia should be able to maintain a healthy growth in exports, especially the semiconductor, machinery and equipment as well as commodities-related exports.
“Imports would also continue to be sustained owing to higher growth imports of capital, intermediate and consumption goods. However, there could be some knee jerk reaction from US customers as they are facing threats of higher tariffs.
“From the psychological perspective there could be a rush to accelerate their overseas purchases before the import tariff would really take place.
“On that note, there could be a positive impact in the immediate terms. But over the mid to long term, should the tariff go ahead as planned, demand from the United States would be affected as product prices become expensive from their point of view,” he said.
Given that the United States remains an important trading partner, any slowdown in its demand could directly impact Malaysia’s exports, Afzanizam said, adding that there could be a slight moderation in exports of around 4.5% to 5% this year as the impact from possible tariff hike could affect demand from the United States.
Afzanizam expects Malaysia to sustain its current account surplus balance in the region of 1.5% to 2.5% of gross domestic product (GDP).
A current account (CA) surplus means a country has more exports and incoming payments than imports and outgoing payments to other countries. Generally, higher CA would be considered positive to a country’s international currency reserves.
Centre for Market Education CEO Carmelo Ferlito points out that in Malaysia’s case, international trade remains the most volatile GDP component as this trade declined by 2.83% in 2020 due to the Covid-19 lockdowns and then rebounded in 2021 and 2022, but declined again in 2023 and rose in 2024.
“Since 2019, the role of the United States as international trading partner has grown from 9% to 11% of Malaysia’s total trade, while it now accounts for more than 13% of Malaysia’s exports.
“It is then clear that trading restrictions from the US may negatively affect Malaysia’s trade figures.
“However, as Chinese firms may try to avoid US duties, Malaysia could be the harbour for transformation processes so that those barriers can be evaded and thus restrictions on China may benefit Malaysia,” Ferlito said.
“Diversification remains key for Malaysia to keep on growing its international trade and the restarting of EU FTA may play a crucial role.
“In fact, the EU-27 still accounts for less than 8% of Malaysia’s trade: the room for growth is high,” he said.
Centre for Market Education CEO Carmelo FerlitoMARC’s Choy said Malaysia’s current account balance-to-GDP ratio is likely to exceed 2% in 2025, rising from 1.7% of GDP in 2024. He attributes this to global technology upcycle, strong tourist arrivals and continued above-trend economic growth in Malaysia.
He expects exports to outpace imports due to the momentum on the size and weight of the merchandise trade balance during periods of strengthening economic growth.
“The build-up towards Visit Malaysia Year 2026 will boost the services account, while earnings from foreign direct investments (FDIs) will remain robust, given above average FDIs cumulatively from 2021 to 2024,” Choy noted.
RAM’s Woon said for this year, he expects Malaysia to continue running a trade surplus that would be wider than 2024.
“For 2025, we anticipate that the demand for capital goods will gradually normalise, which will help widen the gap between exports and imports (trade surplus).
“As a result, the goods surplus should widen in 2025, and we project that the overall current account surplus to improve from its 1.7% of GDP level in 2024,” he said.
