KUALA LUMPUR, 22 September 2025 — Malaysia’s export momentum lost steam in August as new US tariffs and weaker demand for manufactured goods weighed on shipments, underscoring the urgency for exporters to diversify destinations and product mixes. According to research from MBSB Investment Bank and other analysts, the nation’s external trade showed signs of cooling, with export growth moderating sharply compared to previous months.
In July, exports were up about 6.5% year-on-year, buoyed by demand for electrical and electronics (E&E), palm oil, and liquefied natural gas (LNG). But in August, export growth eased to +1.9% y-o-y, well below consensus estimates and signaling that Malaysia’s trade advantage is being tested. Imports meanwhile contracted by about 5.9% y-o-y, marking one of the steepest declines since September 2023.
Much of the pain is traced to the United States, where the imposition of a 19% tariff, effective from early August, has hit Malaysian E&E and manufactured product exports particularly hard. Shipments of these goods to the US dropped sharply — E&E exports were down significantly, while broader manufactured goods saw dramatic declines. Analysts believe the impact will deepen in the second half of 2025 as frontloaded orders subside and tariff effects become entrenched.
Resilient Sectors and Export Diversification
Despite headwinds, sectors like E&E remain somewhat resilient, supported by the global technology upcycle and continuing demand from countries like China and Taiwan. Palm oil and LNG demand have also provided a buffer during the slowdown in manufactured exports. But these are not enough to offset the weakness observed in exports to the US and in mining sectors.
Diversification is increasingly seen as Malaysia’s strategic response. Research notes suggest that broadening export markets beyond the US, strengthening trade relations with RCEP partners, and exploring new bilateral or multilateral trade agreements are essential. Analysts also flag the importance of shifting towards higher value-added products, enhancing logistics, and avoiding over-reliance on sectors vulnerable to external policy risk.
Investor Implications
For investors, these developments carry both warning signs and potential opportunity. The tariff‐induced slowdown in exports to the US is likely to pressure revenue for companies—particularly in E&E and manufacturing—that depend heavily on American markets. Margin compression may ensue, especially for those unable to re-route exports or absorb cost increases.
Conversely, companies and sectors that can reposition quickly—either through alternative export markets or by upgrading product offerings—may gain competitive advantage. The growth in demand from China and Taiwan for E&E, or rising global demand for commodities like palm oil and LNG, could serve as offsetting drivers. Firms that invest in supply chain resilience, regulatory compliance, and trade facilitation are likely to be viewed more favourably.
Macroeconomic and policy risks remain. Currency fluctuations, further changes in trade policy (in the US or elsewhere), and potential retaliatory measures could accentuate the challenges. Budget 2026 and other upcoming government policy announcements may play a decisive role in determining whether diversification efforts are supported through incentives, trade promotion, or sectoral support.
Outlook
Looking ahead into the latter part of 2025, analysts expect export growth for the full year to moderate to around 2–4%, depending on how sharply US demand falls, how well Asia’s demand holds up, and how proactive Malaysian policy responses are. MBSB IB projects export growth at about 2% and import growth at about 4.5% under current conditions.
Policy signals, especially regarding trade-agreements, tariff negotiations, and export support programmes, will be closely watched. For firms, the ability to adapt — in markets, product mix, and cost structure — will distinguish the winners from the vulnerable as global trade enters an increasingly volatile phase.
