This article was produced with infographics republished with the kind permission of The Growth Lab at Harvard Kennedy School.

Effective 1 August 2025, the US imposed a 19% “reciprocal” tariff on Malaysia. This rate is level with US “reciprocal” tariffs set on Malaysia’s regional peers Indonesia (19%), the Philippines (19%), Thailand (19%), and Vietnam (20%) which at the product level helped to cushion potential for uneven tariff impact on trade in the Association of Southeast Asian Nations (ASEAN) region. Furthermore, the impact of the tariffs, when mapped against actual traded goods, is generally lower than the headline figures when product exemptions are factored in.¹

The US is Malaysia’s third-largest export destination (after China and Singapore), accounting for 10.8% (US$38 billion) of its total share of exports in 2023. Notably, Malaysia has the largest bilateral trade surplus with the US at US$23.3 billion amongst all its trading partners, making the US one of its most important export destination.² While not as exposed to the US market, compared to countries like Mexico, Canada, and Vietnam, whose exports to the US represent a larger fraction of their GDP,³ Malaysia’s exports are highly concentrated in sectors on which the Trump administration plans to impose industry-specific duties under Section 232 of the 1962 Trade Expansion Act.

Figure 1: Malaysia's global market share in key sectors, 1995 – 2023

Source: Growth Lab at Harvard University, The Atlas of Economic Complexity

Figure 2: Malaysia’s exports to the world in 2023 (Total value: US$351 billion)

Source: Growth Lab at Harvard University, The Atlas of Economic Complexity
Note: Trade data discrepancies denote differences between exporter- and importer-reported values and product classification that cannot be reconciled through mirroring bilateral trade and harmonizing product classifications.

Electronics dominates Malaysia’s exports to the US and the world (Figure 1 & 3). In 2023, its global electronics exports reached US$119 billion. Semiconductors are the single largest export category, followed by semiconductor devices, and transmission apparatus for radio, telephone, and TVs (Figure 2).

The heavy concentration of exports in the electronics sector makes Malaysia particularly vulnerable to US sectoral tariffs, especially those targeting semiconductors, steel, and aluminum, including the metal content embedded in finished goods such as appliances (Figure 3). Moreover, the Section 232 investigations pending on industrial machinery and aircraft parts (Malaysia is the world’s 16th largest exporter of these goods) also has significant implications for Malaysia.⁴

Figure 3: Malaysia’s exports to the US in 2023 (Total value: US$38 billion)

Source: Growth Lab at Harvard University, The Atlas of Economic Complexity

Currently, several product categories are exempt from the US “reciprocal” tariffs, including goods already subject to Section 232 tariffs, those still pending Section 232 investigations, and important natural resources that not available or not produced in the US in high quantities, such as energy-related commodities, metals, and mineral ores.⁵ For Malaysia, these exclusions provide short-term relief from additional duties on many of its key exports to the US – including semiconductors, computers, pharmaceuticals (generics), petroleum products, and aircraft parts – bringing down its effective tariff rate to 11.9% (according to estimates from Global Trade Alert). Despite the short-term “relative tariff advantage” enjoyed by Malaysia over other countries like Canada, Brazil, India, and China, this benefit is only temporary. Malaysian exporters should be aware that these exemptions may be lifted and should prepare for the possibility of expanded or new tariff measures that could affect their export sectors.

Semiconductor tariffs

Currently, semiconductors remain exempt from US tariffs, pending the final determination of the Section 232 investigation. This temporary reprieve has allowed Asian semiconductor manufacturers some breathing room. However, additional policy signals have sown significant uncertainty. In August, President Trump announced intentions to impose 100% tariffs on semiconductor imports, with potential exemptions for companies operating manufacturing facilities within the US. In September, reports emerged that the US government is considering a “1:1 domestic-to-import” policy for semiconductors.⁶ Under this approach, companies importing more semiconductors than they produce in the US would be subject to an unprecedented 100% tariff.

Given the economic and technological significance of the sector, the prospect of semiconductor tariffs as high as 100% creates substantial uncertainty and risk for the industry across Asia, not least Malaysia (Figure 4).

Figure 4: Destinations of Malaysia's electronic integrated circuit exports in 2023 (Total value: US$74 billion)

Source: Growth Lab at Harvard University, The Atlas of Economic Complexity

Furniture tariffs

The US imposition of an additional 25% Section 232 tariffs on upholstered furniture, kitchen cabinets, and vanities since 14 October have significant impacts on the competitive landscape for Southeast Asian furniture exporters.

Figure 5: Destinations of Malaysia’s other furniture and parts export in 2023 (Total value: US$2.2 billion)
Source: Growth Lab at Harvard University, The Atlas of Economic Complexity

As the US is the largest export destination for Southeast Asian-made wooden furniture, a significant portion of the industry’s revenue and employment is contingent upon continued access to the US market. In 2023, Malaysian furniture exports to the US were valued at US$1.07 billion, accounting for close to 50% of its total sectoral exports (Figure 5). Malaysian exporters are hoping to leverage existing free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to expand sales in markets such as Canada, Chile, Japan, and the UK.

Recognizing the sector’s exposure, Malaysia has actively sought tariff exemptions for its furniture exports and has continued to engage with the US to mitigate the impact of Section 232 measures.⁷ The agreement signed between the US and Malaysia on reciprocal trade⁸ during Trump’s visit for the ASEAN Summit has provided Malaysia with “reciprocal” tariff exemptions on a list of products in the Annex “Potential Tariff Adjustments for Aligned Partners”.⁹ The agreement, however, does not provide any indication for Section 232 tariff exemptions even while certain pharmaceutical and commercial aircraft components are exempted from application of “reciprocal” tariffs.¹⁰

Considering the current trade developments, it is essential for Malaysia to strengthen its domestic capabilities and develop adaptive strategies to navigate an increasingly volatile trade and tariff environment, positioning its businesses to seize emerging trade opportunities.