PETALING JAYA: It remains to be seen whether the positive trade numbers registered in the first quarter of financial year 2025 (1Q25) can be replicated in the months to come, as US tariffs continue to be the main wildcard in the country’s trade outlook.
Malaysia’s trade performance in April 2025 saw a double-digit expansion in both exports and imports. Trade increased by 18.2% year-on-year (y-o-y) to RM261.94bil, the highest monthly value ever recorded since August 2022.
Exports expanded by 16.4% y-o-y to RM133.56bil and imports were up by 20% y-o-y to RM128.37bil.
Nonetheless, given the sharper surge in imports, mainly due to inbound capital goods that surpassed the rise in exports, trade surplus narrowed to RM5.19bil in April from RM24.8bil in March.
Bank Muamalat Malaysia Bhd head of economics, market analysis and social finance Dr Mohd Afzanizam Abdul Rashid said the latest export print was higher-than-expected by a greater margin.
He noted that total exports which grew by 16.4% y-o-y in April were higher than the consensus estimate of 7.5%.
“While this can be a positive start for the figures in 2Q25, it also reflects that there could be front-loading activities among the trade partners.
Exports to the United States which accounted for 14.4% of total exports in April rose by 45.6% y-o-y, albeit slower than the 50.8% y-o-y growth registered in March,” he told StarBiz.
Mohd Afzanizam said Putrajaya’s trade performance for the months of May, June and July is expected to post “fairly stable” growth. However, Afzanizam cautioned that the outlook beyond July will be critically dependent on how tariff negotiations will pan out.
“The fluidity in policy making by the Donald Trump administration makes it hard to predict what the trade performance would be from July onwards. Suffice to say, exports growth would likely hover below last year’s exports growth of 5.7%,” he said.
Electrical and electronics (E&E) products made up the bulk of exports in April, accounting for 45.1% of total shipments. Valued at RM60.23bil, E&E exports rose by 35.4% year-on-year.
Meanwhile, exports of petroleum as well as chemical and chemical products declined by 9.3% and 11.3% y-o-y, respectively, in April.
They were valued at RM8.50bil and RM5.23bil, accounting for 6.4% and 3.9% of total exports.
BMI, a unit of Fitch Solutions, flagged that exports will be a major drag on the country’s growth over the coming quarters. It warned that the E&E exports momentum will almost certainly not be sustained in 2Q25.
“Exports did, admittedly, rise in 1Q25 as exporters attempted to front-run US tariffs. Data from the Statistics Department showed exports of E&E products to the US rising by 28.9% y-o-y in February and 62.9% y-o-y in March.
“However, Malaysia is particularly exposed to US tariffs on semiconductors, which accounted for nearly 20% of US-bound shipments in 2024,” BMI said in a research note yesterday.
To this end, Mohd Afzanizam also concurred that exports would be a main downside risk to the country’s overall growth given Malaysia’s openness to international trade and investment.
On the other hand, economist Geoffrey Williams said April’s trade figures were within expectations due to the front-loading of exports in the first three months of the year ahead of the tariff announcement on April 2.
“We saw a huge surge in exports, especially to the United States in February and March, so the lower exports in April was expected,” he said.
That said, Williams added that export growth and the contribution of net trade to overall economic growth are expected to be front-loaded in the first half of the year, followed by a slowdown in the second half.
He said the front-loading activities from the first three months are likely to be sustained in 2Q25 because of the pause in reciprocal tariffs and ongoing uncertainty around the negotiation outcomes.
“This might push more exports in the April to June quarter to avoid any undesirable outcome after,” he said.
In terms of markets, exports to the United States were the second largest in April, accounting for 14.4% of total exports, expanding by 45.6% y-o-y, with a value of RM19.22bil. This is followed by exports to China which rose by 2.1% y-o-y to RM14.40bil, taking up a 10.8% share of total exports.
In the meantime, imports from China were the largest in April, making up 23.2% of total imports, and increasing by 20.6% y-o-y with a value of RM29.76bil.
Meanwhile, imports from the United States were the third largest last month, accounting for 14.4% of total imports and rising by 111.8% y-o-y with a value of RM18.47bil.
Meanwhile, Universiti Tunku Abdul Rahman economics professor Wong Chin Yoong said the likelihood that the country’s trade performance may see a negative growth rate is low.
This, he said, is on the back of tariff exemptions on local exports to the United States and potential abolition of the 24% reciprocal tariff.
“The impact of the tariffs on our exports to the United States would actually be quite moderate, as more than 60% of Malaysia’s exports to the US are exempted from tariffs.
“Looking ahead, as long as those exports continue to be exempted, the country will likely continue to see positive export growth to the United States and to the rest of the world,” he said.
Wong said his expectation that the reciprocal tariff would be scrapped, leaving only a 10% tariff on most countries, as the base case, is in line with the recent remarks of US Commerce Secretary Howard Lutnick.
“The world is also better prepared for the tariff war this time around, compared with US President Donald Trump’s first stint as president back in 2018.
“Back then, global trade and cross-border foreign direct investment flows slowed sharply in the second half of 2018, with many indicators turning flat or negative.
“However, we are not seeing this kind of scenario now, even though the current tariff war is broader and harsher than it was in 2018. Hence, in that sense, we are more resilient,” he said.
While Wong expects a softer trade performance for Malaysia in May and June, he remains optimistic, citing the latest de-escalation of the United States-China tariff war as a supporting factor.
Meanwhile, Wong also cautioned that two key risks could threaten Malaysia’s trade performance in the coming months, namely the introduction of industry-specific tariffs by the United States and the likelihood of a US recession.
“If you look at our trade statistics, our exports to the United States are heavily concentrated, where about 70% are in petroleum, E&E and machinery. Hence, sector-specific tariffs on semiconductors for instance could have a greater impact on our export performance as compared with country-specific tariffs.
“Further, a recession in the United States will not only have a much larger impact on the country’s overall exports performance, but also that of Malaysia’s other key trading partners, which could also indirectly affect our trade performance,” he added.
Williams, however, said the real concern is the country’s trade balance which has been on a downtrend since August 2023.
“Recovery has been volatile and not sustained,” he said.
However, Mohd Afzanizam and Wong maintain that narrowing the trade surplus in April is not really concerning.
For one, Mohd Afzanizam said imports of capital goods are very volatile compared with other categories such as intermediate goods and consumption goods.
“Hence, it may not be repeated in the months to come especially when business sentiment is cautious. Firms may want to review their capital expenditure and this can have an impact on capital goods import going forward,” he said.
Wong opined that the narrower trade surplus in April was mostly a reaction towards US tariff policies and is not reflective of any structural change in Malaysia’s trade.
“It will be back to more normal levels once the outlook on tariffs becomes clearer. Overall trade balance reflects domestic conditions. As long as our overall savings still exceed overall investment, the trade balance will remain in surplus,” he said.
Going forward, Mohd Afzanizam said Malaysian companies should find new customers to mitigate the impact of tariffs.
However, he also acknowledged that finding new markers is not an easy feat and will take time, as the businesses need to familiarise themselves with the rules and regulations of the new markets.
“This is where the role of the government through the relevant ministries and agencies such as the Investment, Trade and Industry Ministry is critical to facilitate businesses’ transition to new trading partners,” he said.
