PETALING JAYA: Bursa Malaysia’s FBM KLCI was among a host of major Asian bourses that had appreciated in yesterday’s trading session, apparently standing resilient in the face of the 25% tariff imposed by President Donald Trump on all vehicles and foreign-made auto parts imported into the United States.
Some analysts commented that for all the brickbats Trump is receiving, he is merely “levelling the playing field” against lesser known tariffs that have been imposed on the US products imported into other parts of the world.
At the close yesterday, the benchmark FBM KLCI settled at 1,535.73, having surged 17.68 points or 1.2%, as gainers outnumbered losers by 478 to 325.
That performance was mirrored by Singapore’s Straits Times Index, which appreciated 15.50 points to close at 3,979.21, representing a 0.39% increase, as the Hang Seng and the Shanghai Composite Index also closed higher, while the Nikkei 225 and the Stock Exchange of Thailand were among a handful that ended lower.
With Trump appearing undecided yet as to the finer details of his tariff policies, chief investment officer at Tradeview Capital Sdn Bhd Nixon Wong said investors in Asia may have chosen to look past the noise and adopt a wait-and-see approach, seeking confirmation of the US President’s definitive decision on April 2.
“Given this, any announcements, such as this implementation of a 25% tariff on imported vehicles into the United States, are less likely to cause significant market disruptions, especially as global markets have been in a risk-off mode since the start of the year,” he told StarBiz.
In a similar tune, Rakuten Trade head of equity sales Vincent Lau said the positive reaction of the FBM KLCI yesterday is also because Malaysia does not export any cars or automotive parts to the United States anyway, and automotive demand in Malaysia is largely domestically driven.
Investor Ian Yoong anticipates that what Trump has announced on foreign vehicles yesterday would be “small potatoes” compared with what would be coming on April 2, also called “Liberation Day”, which is the date the latter has chosen to launch a barrage of reciprocal tariffs.
“Hence, the lack of reaction by Asian markets,” he commented.
As such, perhaps the more pressing concern over the longer term is whether the tariffs would result in the affected countries – most notably China as one of Malaysia’s largest trading partners – moving and dumping their excess supply of vehicles here.
Wong reckons the impact to Malaysia would be limited, pointing out that the automotive industry operates on a just-in-time manufacturing model, which means inventory level may not be ample.
“The United States accounts for about 17% to 18% of worldwide vehicle sales.
With that in place, car manufacturers may have to divert and clear this portion of ordered sales to other markets, potentially driving down overall car prices locally in the near term.
“But we believe the situation is likely to normalise once these inventory is cleared, he said.
Wong added that a longer term consideration is for these manufacturers to set up production in the United States, which would take time and could be extremely costly.
Offering a broader explanation, Rakuten Trade’s Lau observed that China has yet to emerge as a major player in the United States imported vehicle market anyway, and this could limit the tariff’s impact on Malaysia.
According to the United Nations Comtrade database, the United States imported US$3.82bil worth of motor cars and vehicles for transporting persons from China in 2024, while educational trade website World’s Top Exports reports that the total value of US car imports last year was US$219.5bil.
This means Chinese cars accounted for approximately 1.74% of the total value of car imports into the United States that year.
Cursory web searches of more recent data from January 2025 also indicate that US passenger car imports from China were valued at US$220mil out of a total of US$16.33bil for the month.
This translates to roughly 1.35% of the import value, with countries like Mexico (US$3.68bil), Japan (US$3.45bil), and South Korea (US$3.1bil) dominating the market, cementing Lau’s point that China is not yet a prominent player in the United States vehicle sphere.
On the other hand, Lau pointed out the well known fact that the Middle Kingdom is already supplying a large number of vehicles in recent years to the Malaysian automotive market, which is taking market share from industry players such as Bermaz Auto Bhd
and distributors of renowned Japanese vehicles with a long history of operation in Malaysia.
He said: “This means consumers will be spoilt for choices when it comes to cars, although we are still confident that Proton (Proton Holdings Bhd) and Perodua (Perusahaan Otomobil Kedua Sdn Bhd) will still be able to hold their fort, especially with the affordable, bread-and-butter, segment of vehicles.”
He projected that affordable vehicles would be even more in demand with the introduction of the RON95 targeted subsidies later this year, as consumers look to trade down on cheaper vehicles that are also fuel efficient.
The more interesting development to keep a close eye on, said Lau, would be if there would be any tariffs imposed on semiconductor goods on April 2, and if so, how this would affect Malaysia.
Yeap Jun Rong, a market strategist at IG Asia also said Trump’s tariffs have raised concerns that US semiconductor firms’ substantial manufacturing investments in Malaysia could come under threat and that this “may complicate Malaysia’s ambitions to establish itself as a regional semiconductor hub”.
Meanwhile, a dealer familiar with the Malaysian and Chinese equity market told StarBiz that Malaysia, as one of the world’s largest semiconductor packaging and testing exporters, accounting for 13% of the global market, is facing dual pressures.
On one hand, he said global inflation and demand slowdown pose risks to chip orders; but on the flipside, the 60% tariff imposed by the United States on China electronics will exacerbate supply chain uncertainties, potentially affecting local businesses dependent on China intermediate goods.
“However, within these challenges lie new opportunities. With the accelerating trend of de-risking, China tech companies are speeding up the implementation of the China+1 strategy to diversify supply chain risks.
“Malaysia may thus see more semiconductor-related investments, with companies like YTL Power International Bhd and Inari Amertron Bhd potentially benefiting.
“Additionally, strategic economic zones like the Johor-Singapore Special Economic Zone and free trade agreements signed by Malaysia with various countries will help buffer the impact of tariffs to some extent, providing room for industry adjustments,” said the dealer.
Global funds have sold more than US$2.1bil of Malaysian stocks on a net basis so far this quarter, according to data compiled by Bloomberg, the largest quarterly outflow since the second quarter of 2018.
The benchmark FBM KLCI equity gauge is down 6.8% so far this year.
