PETALING JAYA: While Malaysia’s steady trade momentum is expected to continue into the near term, economists believe that efforts to remain competitive are essential to mitigate external risks.
Going into the first quarter of 2026, Williams Business Consultancy Sdn Bhd founder and economist Geoffrey Williams said much still needs to be done for Malaysia to bolster its trade momentum.
“There will be external risks during 2026 outside of the control of Malaysian policymakers, but the response to those risks is not. So a continuing focus on diversifying trade, reducing trade barriers and promoting competitiveness is essential,” he told StarBiz.
“Although there have been 66 straight months of trade surplus, this has been squeezed since August 2023, but now appears to be strengthening again.
“This is essential if trade is to make a big impact on growth and reduce dependence on domestic demand,” Williams added.
He also noted that reducing non-tariff barriers as per the Agreement on Reciprocal Trade (ART) is essential.
“Implementation is key to this. Malaysia should extend the tariff exemptions given to the United States to all countries, and apply the non-tariff barrier reductions under the ART to all trading partners, to move towards a free-trade policy and end local protectionism,” he said.
On Oct 26, Malaysia and the United States reached a reciprocal trade pact, ART, under which the United States (Malaysia’s third-largest trading partner) pledged to maintain tariffs on Malaysian products at 19%.
In return, Malaysia agreed to remove or reduce tariffs on selected US goods.
Centre for Market Education chief executive officer Carmelo Ferlito believes that the relationship with the United States “is tending toward normalisation.”
“We can expect external trade to remain sustained, but probably moderating in pace. Two main factors are contributing to keep a sustained trade performance, namely the recent agreement with the United States and attempts at diversification.
“Thus, there is a need to intensify intra-Asean trade,” he said.
Malaysia’s trade performance rose 13.6% to RM277.65bil in October, with trade, exports and imports hitting record levels.
All major sectors posted export growth, led by the manufacturing sector with strong demand for electrical and electronic products. Malaysia also achieved its 66th consecutive month of trade surplus since May 2020.
Williams said the trade performance so far in 2025 counters the “conventional pessimistic view that the tariff issues would be damaging.”
“Actually, overall trade, exports and net trade are stronger. It is a vindication of the United States’ approach to push tariff and non-tariff negotiations.
“Trade with the United States has been especially volatile, but there are now almost 3,000 fewer tariffs between the United States and Malaysia, and a new focus on removing or rationalising non-tariff barriers.”
Williams further noted that exports have been volatile during the year due to the tariff negotiations.
“However, they appear to have trended upwards overall and now look very strong. This has been pushed by a search for new markets and a focus on diversifying trade partners, largely due to the impact of the US tariff negotiations.
“It has put Malaysia in a better position with more export sales,” he said.
Meanwhile, Ferlito believes that Malaysia’s trade performance so far is “probably stronger-than-expected.”
“The emerging trade war, while contributing to a slowdown in trade relations with the United States, has pushed Malaysia to accelerate trading with other partners, in particular within Asean and with China.”
