Malaysia-U.S. Tariff Negotiations: PM Anwar Ibrahim Highlights Economic Growth Concerns

Prime Minister Datuk Seri Anwar Ibrahim confirmed Malaysia is negotiating with the U.S. to reduce a 24% tariff on Malaysian exports, part of a U.S. trade policy from April 2025. The tariff impacts Malaysia's economy, heavily reliant on U.S. exports, and may cause Malaysia to miss its 2025 GDP growth target of 4.5% to 5.5%. Anwar refuted claims of a 47% Malaysian tariff on U.S. imports, stating it averages 5.6%. Malaysia is also exploring a bilateral trade agreement with the U.S. and strengthening regional cooperation through ASEAN.

U.S. Tariffs and Malaysia’s Response

On April 2, 2025, the U.S. government, under President Donald Trump, announced a sweeping 10% universal tariff on imports from all countries, alongside a steeper 24% tariff specifically targeting Malaysian goods. The move was part of the administration’s “Liberation Day” trade policy aimed at recalibrating trade imbalances. Malaysia, which recorded RM199 billion in exports to the U.S. in 2024 and maintains a RM72 billion trade surplus, was among 18 countries invited to negotiate exemptions or reductions.

During a special parliamentary session on May 5, Anwar emphasized that the U.S. has agreed to continue negotiations, though no agreement has been finalized. “Although these are preliminary discussions, the United States government has agreed to further negotiate with Malaysia, and there is a possibility of reducing the reciprocal tariff imposed,” he told lawmakers.

Anwar also refuted claims from Washington that Malaysia imposes a 47% tariff on U.S. imports. “The actual average tariff on U.S. imports into Malaysia is only 5.6%,” he clarified, calling the 47% figure “inaccurate and lacking sound economic reasoning.”

Diplomatic Engagements and Trade Strategy

Malaysia’s diplomatic efforts have included a visit by Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz to Washington, D.C., from April 22 to 24. During the visit, Malaysian officials met with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. Anwar described the meetings as “constructive” and said they laid the groundwork for formal negotiations.

Malaysia has also expressed willingness to address non-tariff barriers cited in the U.S. 2025 National Trade Estimates Report and is open to reducing its bilateral trade surplus. Additionally, the government is exploring the possibility of a bilateral trade agreement with the U.S.

In parallel, Malaysia is strengthening regional cooperation. At the Special ASEAN Economic Ministers’ Meeting hosted in Kuala Lumpur on April 10, member states agreed to coordinate their responses to U.S. tariffs. Anwar highlighted ASEAN’s collective economic strength, noting the bloc’s combined GDP of US$4 trillion in 2024.

Economic Growth Projections Under Pressure

The imposition of tariffs and the broader global trade tensions have cast a shadow over Malaysia’s economic outlook. The country’s GDP growth forecast for 2025, initially set at 4.5% to 5.5% in Budget 2025, is now under review. Anwar, who also serves as Finance Minister, acknowledged that Malaysia is unlikely to meet the target.

“The situation remains dynamic. It is quite likely that we may not achieve the GDP growth projection of between 4.5% and 5.5% as outlined in Budget 2025,” he said. The Ministry of Finance and Bank Negara Malaysia are currently assessing the impact of the tariffs and will revise the forecast once there is more clarity on U.S. trade policy.

The International Monetary Fund (IMF) has already adjusted its outlook, lowering Malaysia’s 2025 GDP growth projection to 4.1% from 4.7% in January. Investment, Trade and Industry Minister Tengku Zafrul echoed these concerns, stating, “There is a huge possibility that we will miss the projection.”

Market Sentiment and Investment Outlook

Despite the uncertainty, some financial institutions remain cautiously optimistic. Japanese financial group Nomura revised its 2024 GDP growth forecast for Malaysia to 5.8% and upgraded Malaysian equities to “overweight.” However, fund managers have noted that Malaysia’s small and relatively illiquid market—currently holding a 1.5% weight in the MSCI Emerging Market Index—makes it vulnerable to external shocks.

TA Investment Management Bhd’s Choo Swee Kee advised a defensive investment strategy, emphasizing large, stable stocks and cash holdings. “Malaysia’s valuations are attractive and considered reasonable, but we would need a good catalyst to jump-start the market,” he said.

MIDF’s Imran Yassin added that while Malaysian equities are appealing, the lack of clarity on U.S. trade policy makes it difficult to forecast economic and earnings prospects. “The outlook is a bit cloudy at the moment,” he noted.

Trade Compliance and Future Partnerships

In response to concerns about tariff evasion, Malaysia has announced plans to tighten export documentation to prevent transhipment abuses. The government is also looking to diversify its trade portfolio by enhancing ties with China and the European Union. Anwar confirmed that negotiations to upgrade the ASEAN-China Free Trade Agreement are expected to conclude soon, with trade ministers scheduled to meet on May 19.

As chair of ASEAN in 2025, Malaysia is positioning itself as a regional leader in navigating the shifting global trade landscape. Anwar reiterated that any stance on American tariffs must be made collectively through ASEAN, underscoring the importance of regional solidarity.

References

• Malaysia pins hope on easing US tariffs amid trade tension, flags GDP growth concerns
• Malaysia making early headway in US tariff talks, Anwar confirms
• US reciprocal tariff on Malaysia may be reduced, says Anwar
• Malaysia unlikely to hit 2025 GDP growth target, says Tengku Zafrul
• Malaysia PM sees possible reduction in U.S. tariffs, but growth to miss target
• Anwar: US open to tariff talks with Malaysia, possible tariff reduction on the table
• Foreign funds continue to retreat as trade tensions weigh on Bursa