Act now to shield exports

PETALING JAYA: As Malaysia’s exports come under pressure in 2025 due to the US trade protectionist policy, economists suggest the country should take proactive measures to ensure exports are not severely impacted.

This year, they expect Malaysia to record a positive trade surplus, although lower than last year’s figure.

A trade surplus occurs when a country’s exports exceed its imports.

Exports of goods and services as a percentage of real gross domestic product (GDP) stood at 68% in 2024.

RAM Rating Services Bhd economist Nadia Mazlan

RAM Rating Services Bhd economist Nadia Mazlan, who anticipates Malaysia’s export growth to soften this year, told StarBiz the country should engage in swift and successful trade negotiations with the United States to boost exports.

This is crucial to prevent the re-imposition of higher reciprocal tariffs on Malaysia, which could significantly affect export demand this year, she said.

However, Nadia noted that Malaysia may need to ramp up imports from the United States in return, which may offset some of the widening trade surplus.

“To further strengthen Malaysia’s export momentum this year, exporters can leverage existing trade agreements.

“One example is to tap into new demand from the United Kingdom, which recently ascended to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“In the more medium term, Malaysia could diversify its export markets through deeper engagements not only with Asean, but other regions like the Middle East and Africa,” she said.

Nadia proposed for Malaysia to continue its efforts to move up the value chain to produce more high-technology goods to bolster the resilience of its export market.

She projected Malaysia’s trade surplus will remain positive in 2025, albeit a slight moderation from last year’s RM136.8bil.

Weaker global trade activity is expected to impinge exports more than imports.

Nadia explained that Malaysia’s export and import growth typically move in tandem, given that about half of imports are intermediate goods.

However, the drag on import growth is expected to be muted as imports of consumption goods should be supported by relatively robust domestic demand.

“The front-loading of purchases to get ahead of reciprocal tariffs could lend some support to Malaysia’s export growth.

“Electrical and electronics (E&E), Malaysia’s key export product, is expected to continue driving export demand, fuelled by continued advancements in artificial intelligence and the semiconductor upcycle,” she said.

Exemptions on certain semiconductor chips should help drive near-term demand, Nadia explained, although E&E-specific US tariffs currently under review could stifle some of the momentum if implemented.

Malaysia registered a growth of 5.7% in exports last year. In March 2025, total trade expanded by 2.2% year-on-year (y-o-y) to RM249.89bil – the highest March figure on record.

Exports surged 6.8% to RM137.31bil, also a record for the month, while imports fell by 2.8% to RM112.59bil.

The trade surplus widened by 94.4% y-o-y to RM24.72bil, the highest monthly value since June 2023 and the 59th consecutive surplus since May 2020.

OCBC Senior Asean economist Lavanya Venkateswaran

OCBC senior Asean economist Lavanya Venkateswaran said that to boost Malaysia’s exports in the near term, frontloading exports to the United States and staggered capital goods imports would help maintain the trade surplus.

Over the medium term, she suggested tapping into new trading partners and diversifying the export base would help make exports more resilient.

She noted that Malaysia’s export growth would likely be shaped by the implementation of US tariffs.

“Currently, we estimate that about 46% of US imports from Malaysia are exempt from tariffs, hence, the frontloading of exports to the United States is likely to continue until the tariffs come into effect.

“Our baseline (forecast) is for goods exports (under the GDP accounts) to slow to 2.7% y-o-y in 2025, versus 5.5% in 2024, while goods import growth is expected to slow to 3.5% y-o-y, versus 9.5% in 2024.

“E&E has been the backbone of export growth in the region, and we expect the frontloading of exports to the United States to also benefit this category,” she noted.

Venkateswaran forecasted trade surplus to remain sustainable this year.

“Even with export growth slowing, import growth will also likely ease, allowing for a relatively comfortable trade surplus in 2025.

“We forecast the current account surplus will remain comfortable around similar level to 2024 (for example, 1.7% of GDP).

“However, the risk is that volatile trade flows could lead to lower current account surplus,” she said.

A current account surplus means a country has more exports and incoming payments than imports and outgoing payments.

Generally, a higher current account would be considered a positive for a country’s international currency reserves.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid expects Malaysia to record a trade surplus this year, albeit slightly lower than last year.

To boost exports, he said the government would need to increase outreach to export-oriented micro, small and medium enterprises to encourage better utilisation of preferential treatments under various free trade agreements (FTAs) with other countries.

“This will help improve access to new markets and reduce the cost of doing business,” he said.

Centre for Market Education CEO Carmelo Ferlito

To further enhance exports and strengthen the trade surplus, Centre for Market Education chief executive officer Carmelo Ferlito said policymakers must push for more FTAs and zero reciprocal tariffs.

He also pointed out that numerous non-tariff barriers, both in the West and South-East Asia, need to be dismantled to facilitate more trade.

He also highlighted that it’s a mistake to look at things from an aggregate perspective without considering the microfoundations, as economic activities occur at the micro level.

Elaborating on this, Ferlito said: “It is important to understand that it is not Malaysia trading with the United States or the European Union (EU).

“For example, by merely stating that we can move 10% of exports from the United States to the EU overlooks the fact that it is a Malaysian firm exporting to an American or European firm.

“Commercial transactions are between firms, not countries.

“So, can the US client find a more cost-effective supplier after the tariff? What are the transaction costs involved in such a search?

“And, if the American client is lost, can the Malaysian firm find a European customer to replace them?”