KUALA LUMPUR (April 3): The Federation of Malaysian Manufacturers (FMM) has issued a stark warning regarding the US' decision to impose a 24% reciprocal tariff on Malaysian exports from April 9, saying it could lead to significant reduction in export volumes, job losses and supply chain disruptions affecting both Malaysian producers and US-linked multinational operations here.
While some categories of goods are exempt from the new tariffs — including semiconductors, pharmaceuticals, copper, lumber, bullion and certain critical minerals not available in the US, as well as steel, aluminium and automotive products already covered under existing tariffs — most other Malaysian exports to the US will be affected, FMM said in a statement on Thursday.
Expressing "deep concern" over the development that underscores that Asean economies are facing heightened US scrutiny, FMM said the new tariffs could also adversely affect the broader ecosystem, including suppliers, logistics providers, and downstream service sectors due to shifts in sourcing and manufacturing decisions resulting from the tariffs.
The reciprocal tariffs are "especially troubling" given Malaysia's strong trade ties with the US and its commitment to open and fair trade, FMM said, but noted that the US had stated that tariff levels might be reduced if trading partners remedy non-reciprocal trade arrangements or align with the US' economic and national security goals.
Hence, it urged the Malaysian government to present clear evidence of Malaysia's open import regime, citing its low 5.6% average applied most-favoured-nation tariff, and the fact that over 50% of tariff lines are duty-free.
"These indicators reinforce that Malaysia does not impose protectionist duties and remains committed to rules-based, reciprocal trade — an important basis for seeking reconsideration under the US reciprocal tariff mechanism," it said.
It also called on the government to reinforce its commitment to strategic cooperation on economic and security priorities — including semiconductor supply chains, investment screening, and export control alignment — through bilateral platforms like the US–Malaysia Trade and Investment Framework Agreement and regional frameworks like the US-led Indo-Pacific Economic Framework for Prosperity.
And while FMM welcomed the Ministry of Investment, Trade and Industry's continued engagement with US authorities and the establishment of the National Geoeconomic Command Centre (NGCC) as a central coordinating platform, it "strongly recommends the inclusion of industry representation, particularly FMM, in the NGCC and its associated high-level task forces".
"This will help ensure that ground-level business realities, supply chain disruptions, and sector-specific vulnerabilities are accurately reflected in the development and execution of mitigation strategies," it added.
FMM opposes new taxes amid severe cost pressures
The association also urged the government to refrain from introducing additional tax burdens or regulatory burdens that could further strain the industry, citing severe cost pressure faced by the manufacturing sector, which is already the largest tax revenue to the country, accounting for RM221 billion or 68.6% of total tax collections.
This is also in view of the expansion of the sales and service tax in May and the impending increase in electricity tariffs in July, which it said will significantly raise costs for manufacturers, including the vulnerable small and medium enterprises, or SMEs.
"FMM urges calm but firm and strategic action from the government and the industry to safeguard Malaysian exports and competitiveness," FMM said. "We are committed to working with all key stakeholders to navigate this critical period."
Source: The Edge Malaysia
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