Containers of goods at Port Klang. The economic uncertainties from the United States’ tariff hike on our export goods are worrying Malaysian employers and industry players. — Bloomberg
WASHINGTON’S temporary suspension of its reciprocal tariffs has provided a “momentary reprieve” for Malaysia amid the escalating global trade tensions.
Still, the economic uncertainties from the United States’ tariff hike on our export goods are worrying Malaysian employers and industry players.
Touching on the effects of the tariffs, Sunway University economics professor Dr Yeah Kim Leng explains how it could affect revenue, job security and ultimately, the sustainability of the minimum wage.
Prof Yeah, who also sits on the Finance Minister’s panel of special advisers, notes that in 2024, 13% of Malaysia’s merchandise exports went to the US. While the overall value share may not be large, dependency on the US market varies significantly by sector. He notes high exposure in industries like furniture (44%), apparel (28%), rubber products (25%), measuring and precision equipment (25%), electrical and electronics (20%), machinery (20%) and iron and steel products (17%).
“These industries will likely face a sharper decline in US demand due to higher prices as a result of the tariffs. The extent of the decline depends on how much prices change, as competing imports from other countries may face even higher reciprocal tariffs under Trump’s policy.
“Lower exports will result in cutbacks in production that could lead to layoffs if the demand shock is severe. The country’s low unemployment rate at 3.2% may see an uptick this year but not a spike – unless the high US tariffs remain for more than two to three quarters.”
According to Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai, preliminary findings from an ongoing FMM survey show that many Malaysian manufacturers anticipate export costs to rise by at least 10% to 30% alongside operational costs, due to both direct and indirect impacts of US tariffs. This will make it a challenge to balance fair wages while maintaining price competitiveness globally, he notes.
“FMM members are increasingly facing the challenge of balancing the need to provide fair and competitive wages with the imperative to maintain price competitiveness in global markets.
“This balancing act has become more complex as companies grapple with rising production costs, including higher raw material prices, escalating logistics expenses, increased compliance costs, and broader geopolitical uncertainties that disrupt supply chains,” says Soh.
While manufacturers are committed to upholding fair labour practices and ensuring decent wages in line with national policies and international standards, they also operate in highly competitive global markets where cost efficiency and price sensitivity are critical to winning and sustaining business, he explains.
“Many manufacturers, especially those involved in export- oriented sectors, are under pressure from international buyers who expect high-quality products at competitive prices, often benchmarking against lower-cost manufacturing economies. In response, companies have had to aggressively pursue strategies to contain and manage costs without compromising on quality or labour standards,” says Soh.
In light of the unprecedented global challenges, the FFM urges the government to defer policies raising operational costs.
“The persistent burden of excessive and unnecessary regulatory compliance will further compound operational costs and undermine competitiveness.
“FMM continues to advocate for comprehensive support measures to help manufacturers navigate these challenges.
“By creating a more enabling ecosystem, Malaysia can better support its industries in providing fair wages while remaining globally competitive,” says Soh.
Concurring, Malaysian Employers Federation (MEF) advisor Datuk Shamsudin Bardan also urges for the deferment of policies that will raise operational costs, specifically the proposed increases in electricity and water tariffs.
They may affect micro, small and medium enterprises (MSMEs), which are already being impacted by the global economic uncertainties due to the tariffs imposed by the US, he says.
“The Trump tariffs have had a significant impact, especially on businesses involved in supply chains and exports to the US.”
The MEF also suggests that the government consider additional flexibility for the micro sector in the upcoming implementation of the new minimum wage for workers.
“We were fairly comfortable with the utility rate increases determined by the government before the imposition of the tariffs. A salary of RM1,700 was also seen as a survivable income.
“However, it is evident that under the current situation, employers, especially micro enterprises, need more time to adjust to the new rates,” Shamsudin tells Astro Awani during a special interview.
For the present moment, Shamsudin stresses that the government should focus on helping companies remain competitive rather than increasing costs that could threaten business continuity.
This is especially relevant given calls for an increase in the minimum wage, which could also burden employers to the point of businesses shuttering or instituting lay-offs, he says.
This is part of a special report by Media in Arms.
