The Small Medium Enterprise (SME) Association of Malaysia believes that US President Donald Trump’s announcement of tariffs on major US trading partners, including China will not have a considerable impact on SMEs in Malaysia in the short term.
Its president Chin Chee Seong said while the latest American policy had caused certain sectors to be concerned about the possible impact, it will not severely affect Malaysia’s enterprises which do not export many products to the US.
“Trump has said that if businesses do not set up operations there, tariffs will be imposed. But right now, the SME industry hardly sells much products there,” said Chin.
“Previously, our furniture exports to the US were high, but there has been a sharp decline in recent years, with the focus shifting to other nations.”
According to a report last year, the decline of Malaysian furniture in the US market was largely due to continued weak furniture demand as the US housing market continues to be negatively impacted by elevated interest rates, resulting in US housing becoming increasingly unaffordable.
The report noted that one of the main reasons Malaysian furniture exports to the US declined significantly in 2023 was because US homebuyers faced an unaffordable housing market due to the US Federal Reserve interest rate hikes.
There are some 1.15 million SMEs in Malaysia who contribute over 38 per cent, or more than RM500 billion, to Malaysia’s GDP. The sector is a major driver of the nation’s economy.
Chin said that while the key to avoiding US tariffs was to get businesses to set up bases and operations in America, he believes the target was not Malaysia, but rather, China.
“The US knows that a lot of Chinese companies are setting up bases in Asean countries, including Malaysia and Vietnam, where products are rebadged or rebranded and exported to the US to make it look like they are from Malaysia,” he said.
Last December, deputy Investment, Trade and Industry minister Liew Chin Tong urged businesses from China not to “rebadge” their products in Malaysia, merely to dodge US tariffs.
Last week, Malaysia’s Prime Minister Datuk Seri Anwar Ibrahim said the country will continue to actively build trade relations with other nations instead of just waiting for the impact of potential US trade tariffs.
This morning, the Malaysian Iron and Steel Industry Federation urged the government to reinforce anti-dumping legislation in view of the US’ plan to impose a 25 per cent tariff on steel and aluminium imports.
In a statement, the federation said while the consequences of the 25 per cent tariffs remain uncertain, it is however expected to accelerate trade diversion, leading to a surge in steel products into the Malaysian market.
“China has used countries such as Canada, Mexico, Brazil, and Vietnam to circumvent US tariffs. In response to this, numerous North and South American countries have implemented their own version of tariffs over the past six months to stop the flood of Chinese steel products into their respective countries. But the damage has been done,” the statement read.
This is one of the main reasons why the US removed exemptions and exceptions given to them in the past. With these new tariffs, and with the expansion to downstream goods, this new environment does not make them viable export destinations. Countries like China that previously circumvented tariffs, along with South Korea, Japan, and Vietnam, that obtained exceptions with yearly quotas, will likely be diverting their exports to Malaysia.
The federation added that governments in Asean are already taking steps to address the influx, with Vietnam and Indonesia imposing anti-dumping tariffs on Chinese goods. Thailand meanwhile, recently announced measures to monitor cheap imports.
It also noted that access into Indonesia, Thailand, and Vietnam, was significantly tightened recently with their respective governments paying close attention to excess steel being dumped into their respective country’s domestic steel industry.
“Without immediate and decisive action, Malaysian steel manufacturers will suffer lasting and irreversible damage. We strongly urge the government to take swift action – by reinforcing anti-dumping legislation, expediting investigations, and implementing measures to protect the industry before severe repercussions occur,” the federation added.
