GEORGE TOWN, April 8 — The imposition of a 24 per cent tariff on exports to the United States may reduce Malaysia’s attractiveness for future foreign direct investments (FDI), according to Penang state government’s investment arm, InvestPenang.
They said the tariff sends a negative signal to prospective investors who may now see Malaysia as less competitive export based compared to countries with preferential trade terms.
“This may reduce Malaysia’s attractiveness for future FDI, particularly in high-value manufacturing sectors,” they said in a statement issued today.
They also said export-oriented companies are exploring supply chain realignments, including shifting production to countries with lower tariff exposure and relocating segments of operations to the US.
“Malaysian Local Automated Test Equipment (ATE) companies that export to the US are actively evaluating the feasibility of establishing final module assembly lines within the US to circumvent the steep tariff increase and maintain market access,” they said.
They said multinational corporations (MNCs) with existing operations in Mexico are also considering production shifts to Mexico due to the US-Mexico-Canada Agreement (USMCA).
The USMCA, which allows 0 per cent tariffs on compliant goods, positions Mexico as a key beneficiary in this evolving trade landscape.
“Non-compliant goods currently face a 25 per cent tariff but this is expected to fall to 12 per cent if the existing fentanyl/migration IEEPA orders are terminated,” they said.
InvestPenang also pointed at mounting concern over the potential dumping of excess inventory from neighbouring countries into Malaysia’s domestic market.
This could undercut local manufacturers, particularly SMEs, and distort market prices.
“Industry leaders warn of rising inflationary pressures, potential contraction in manufacturing activity, and job losses in the near term if the tariff issue is not promptly addressed,” they said.
They said competition from Asean countries and India remain moderate but if there is a favourable outcome on the trade negotiations between Vietnam and US could alter regional competitiveness and influence future investment flows.
“Industry stakeholders are calling on the Malaysian government to initiate urgent bi-lateral discussions with the US administration,” they said.
They said there is strong recommendation to negotiate tariff reductions, and to monitor negotiations with competing markets such as Mexico, Costa Rica, Poland and Ireland.
“This move is deemed critical to preserving the competitiveness and sustainability of Malaysia’s industrial base,” they said.
