PETALING JAYA: Malaysia’s exposure to rising trade tensions reflects both its position within global value chains and its reliance on final demand from key markets, particularly the United States and China.
Although higher tariffs have raised trade costs, final demand conditions in the United States remain supported by robust demand for technology products, keeping Malaysian exports resilient across multi‑stage production networks.
The diversification of demand and input sourcing inherent in global value chains allows firms to absorb trade shocks, including tariffs, while maintaining production continuity, Bank Negara Malaysia (BNM) said in its 2025 annual report.
Malaysia’s domestic exports to the United States continued to register positive growth in 2025 despite higher tariffs.
This growth was driven mainly by electrical and electronic (E&E) products, which accounted for more than half of the increase in export receipts.
In addition to being largely exempted from tariffs, strong shipments of semiconductor devices and integrated circuits reflect Malaysia’s integrated role in the global technology value chain, underpinned by its position as the world’s ninth‑largest E&E exporter and its durable supply chain relationships.
Additionally, Malaysia’s resilience has been supported in part by the composition of its export mix and the nature of the US tariffs introduced during this period.
Although trade frictions between the United States and China have intensified, spillovers to Malaysia remained modest.
A key factor is that the effective tariff burden on Malaysia’s exports to the United States, which is calculated based on import duties collected relative to the value of Malaysian exports, was lower than that faced by several regional peers in 2025.
BNM said this matters because firms adjust to actual cost pressures rather than headline tariff rates.
Based on S&P Global data, following the increase in US tariffs on Chinese goods, US imports from China declined sharply, while imports from regional countries, including Malaysia, rose correspondingly.
Meanwhile, the domestic value added (DVA) segment captures the portion of exports created within the country.
DVA, or the “local content”, is a stronger channel through which exports translate into domestic incomes and jobs. Malaysia’s ability to generate DVA within its exports has improved over time, as DVA intensity has increased modestly across most sectors.
BNM noted that the rise in DVA intensity across manufacturing between 2010 and 2022 indicates meaningful upgrading in the supply chain, as firms progress into more complex activities or advanced production stages, enabling a larger share of value to be generated domestically.
