PETALING JAYA: Looming new US tariffs and geopolitical tensions in the Middle East are increasingly complicating trade flow prospects for local exporters as they grapple with rising costs and operational pressures.
On the plus side, uncertainty over US trade policy is raising the possibility of US importers frontloading, as exporters from across the world consider accelerating shipments before any new duties take effect.
While that may likely be the case, economists said such activity may not be as pronounced as last year.
Centre for Market Education chief executive officer Carmelo Ferlito said frontloading is likely selective rather than broad-based at this stage.
Ferlito noted the threat of new tariffs by the United States, following the US Supreme Court’s ruling to invalidate US President Donald Trump’s International Emergency Economic Powers Act (IEEPA) tariffs earlier this year, created an incentive for some exporters to accelerate shipments where contracts, inventories and logistics allow, especially in sectors with shorter production cycles.
“However, many firms are also likely to avoid over-reacting because the scope, timing and product coverage of any new tariffs are still uncertain,” Ferlito told StarBiz.
Ferlito said that companies are probably using a mixed strategy. Some firms, he said, may frontload shipments as a precaution, but many others will be focusing on diversification of markets, review of supply chains, tighter inventory management and stronger compliance documentation rather than simply rushing goods into the US market.
“In other words, this is less likely to be a classic panic frontloading episode and more likely to be a targeted hedging response concentrated in sectors most exposed to US policy risk. Consider also the ‘messy’ international scenario, which makes everything more complicated,” Ferlito said.
In February, the US Supreme Court struck down Trump’s sweeping 2025 reciprocal tariffs imposed under IEEPA. Shortly after, Trump invoked Section 122 of the Trade Act of 1974, imposing a 10% tariff – later raised towards the maximum allowable 15% – for up to 150 days to address balance of payments concerns. This measure is set to expire in July unless an extension is approved by Congress.
While tariffs under IEEPA have been overruled, those under Sections 301 and 232 remain intact, with the former targeting unfair trade practices and the latter allowing sector-specific tariffs on national security grounds.
At the same time, the United States also launched new Section 301 investigations last month and intends to move the process along quickly, potentially before Section 122 tariff measures expire.
Signs of frontloading have already emerged globally. China’s outbound shipments expanded by 21.8% year-on-year (y-o-y) in US dollar terms for the January-to-February period, marking the biggest gain in four years.
This also represented a sharp acceleration from the 6.6% uptick posted in December and far exceeded the 7.1% median forecast in a Reuters poll.
Economists said China’s export growth in March is likely due to factories rushing shipments to the United States to exploit the Supreme Court’s tariff reprieve as well as a rebound in lower value-added sectors such as textiles.
Federation of Malaysian Manufacturing (FMM) president Jacob Lee Chor Kok said it is seeing selective frontloading from larger exporters who have the warehouse capacity to store inventory. However, for SMEs, frontloading is expensive and risky, given the recent surge in global freight costs due to the ongoing maritime disruptions.
Lee said rather than taking a wait-and-see approach, most local manufacturers are closely monitoring the situation and taking proactive steps to manage risks.
“The United States’ new Section 301 investigations specifically target structural overcapacity in sectors like semiconductors and solar modules. Companies in these industries are proactively diversifying their customer base, while others are ensuring their products are clearly documented as Malaysian-made,” he said.
Top Glove Corp Bhd
said the company has not seen any meaningful pull forward in orders from its US customers. Given that potential tariffs under Sections 301 and 232 are still subject to ongoing investigations and remain uncertain, the glove maker said customers have generally maintained their usual ordering and inventory patterns, and tariff risks have not been explicitly cited.
“Meanwhile, the group has continued to record steady demand growth over the past few quarters, supported by ongoing healthcare and industrial usage,” it said.
Attention now is also turning to Malaysia’s exposure under the ongoing Section 301 investigations. In March, the United States launched two new Section 301 investigations: one examining structural excess capacity in global manufacturing across several economies, and another probing whether major trading partners have failed to enforce bans on goods produced with forced labour.
Malaysia is among the countries named in both investigations.
Monitoring Sustainability of Globalisation director Charles Santiago said the country is “significantly at risk” of facing a new round of tariffs under Section 301, with sectors like plantations, gloves, services and manufacturing most at risk.
“Malaysia has already been flagged as a country that violated forced labour protocols prior to this, with local plantation and glove companies cited for practices such as withholding passports and delayed wage payments. There will likely be some form of sanctions imposed on Malaysia, depending on the outcome of the Section 301 investigations.
“Nevertheless, this also presents an opportunity for Malaysia to undertake necessary reforms. What is important now is for the country to show that changes are being made. To be fair, the country has taken some measures. For example, Employees Provident Fund contributions are now being provided for migrant workers, offering some level of social protection. However, more can be done. One key area is the elimination of recruitment fees,” he said.
Ferlito concurred the risk is real but “uneven across sectors” with rubber glove and palm oil-related supply chains among the most exposed. At the same time, some recent US actions show that remediation matters, he added.
“The US lifted import restrictions on Malaysian glove maker Brightway Holdings in 2024 after remediation, and in January 2026 US Customs modified its order on FGV’s palm oil.
“So the message is not that Malaysia is inevitably heading toward blanket tariffs, but that sectors with legacy labour-compliance issues remain the most vulnerable unless enforcement, traceability and labour-market governance improve in a credible and documented way,” he said.
Meanwhile, OCBC senior Asean economist Lavanya Venkateswaran said it is too early to gauge the degree of exposure or the sectors at risk from the Section 301 investigations.
“It seems to us the broader agenda of some form of tariff implementation and collection remains on the cards,” she said.
Beyond tariffs, the biggest factors shaping Malaysia’s export outlook today must be read through the lens of the ongoing tensions involving Iran and the Strait of Hormuz. According to Ferlito, the risk of disruption in this corridor introduces a layer of uncertainty that goes well beyond traditional trade policy concerns.
For Malaysia, any escalation around Hormuz means higher input and transport costs for exporters, as well as weaker external demand if energy prices weigh on growth in key markets.
This remains at the forefront of manufacturers’ concerns, with FMM’s Lee pointing to the “cascading costs” of logistics due to the closing of shipping lanes.
More than half of FMM’s members reported freight rates have risen by 20% to 50%.
As it is, domestic Industrial Production Index (IPI) growth was the slowest since June 2025 at 3.1 y-o-y in February, weighed by contractions in the manufacturing and electricity sectors. It was also much lower than the median consensus estimate of 5%.
To an extent, the ongoing semiconductor upcycle provides a structural cushion to exports, with strong global demand for electrical and electronic products anchoring export performance. However, Ferlito flagged downside risks are now more clearly tied to geopolitical developments.
Still, Lavanya is of the view that Malaysia’s exports will be more insulated as exports to the Gulf Cooperation Council economies were modest at 1.8% of total exports in 2025 and higher commodity prices of liquefied natural gas and crude palm oil could provide some offset to higher oil prices supporting the trade balance.
“The vulnerability from persistently higher global oil prices for Malaysia’s economy is on the fiscal side given the presence of subsidies, albeit more targeted than previous episodes of oil price shocks,” she said.
end
