PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) is urging the government to postpone the introduction of new taxes due to the 24% tariff rate on Malaysian imports by the United States.
"The manufacturing sector is already under severe cost pressures and is the largest contributor to national tax revenue, accounting for RM221bil or 68.6% of total tax collections," said FMM president Tan Sri Soh Thian Lai.
"The expansion of the Sales and Service Tax (SST) effective May 2025, along with impending increase in electricity tariffs in July 2025… will significantly raise compliance and operational costs for mid-tier and large manufacturers as well as vulnerable SMEs.
"FMM reiterates its call for a moratorium on new taxes or regulatory burdens that could further strain the industry and affect employment, reinvestment and national productivity," he said.
He said the new tariffs imposed by the United States would disrupt trade flows and affect Malaysia's position as a regional and global supply network.
"While some categories of goods are exempt from US reciprocal tariffs including semiconductors, pharmaceuticals, copper, lumber, bullion and certain critical minerals not available in the United States as well as steel, aluminium and automotive products already covered under existing Section 232 tariffs, most other Malaysian exports to the United States will be affected," he said.
These include key products such as gloves, plastics, electrical and electronic goods not classified under semiconductor categories and industrial machinery.
Affected sectors will be hit with the full 24% tariff rate, which could lead to a significant reduction in exports, job pressures within affected industries and the re-routing or restructuring of supply chains involving Malaysian producers as well as US-linked multinational operations based in Malaysia," he added.
Soh said the broader ecosystem, including suppliers, logistics providers and downstream service sectors, could also be adversely affected by the shifts in sourcing and manufacturing decisions in response to the tariffs.
He branded the move by US President Donald Trump's administration as "troubling" given Malaysia's strong trade relationship with the United States and the country's long-standing commitment to open and fair trade.
"From FMM's perspective, while Malaysia's tariff rate of 24% is comparatively lower than our Asean neighbours, namely Cambodia (49%), Vietnam (46%) and Thailand (36%), we are nonetheless categorised within a punitive group of economies," he said.
This underscores that Asean economies are facing heightened scrutiny. Within the region, Malaysia both competes and complements our regional peers. In some sectors such as electronics, rubber-based products, and machinery, we are direct competitors. In others like semiconductors and industrial components, Malaysia plays a complementary role within integrated supply chains."
The United States has stated that tariff levels may be reduced if trading partners take significant steps to remedy non-reciprocal trade arrangements or align more closely with US economic and national security goals," he added.
Soh said FMM welcomed the government's proactive measures, including the establishment of National Geoeconomic Command Centre (NGCC), as a central coordinating platform.
Soh said Malaysia's present clear and verifiable evidence of Malaysia's open import regime and reinforcing Malaysia's commitment to strategic cooperation on economic and strategic cooperations would also help.
This includes semiconductor supply chains, investment screening and export control alignment under bilateral platforms like the US-Malaysia Trade and Investment Framework Agreement (Tifa), and regional frameworks like the US-led Indo-Pacific Economic Framework for Prosperity (Ipef).
"Malaysia's active role in Ipef should be recognised as evidence of shared commitment to rules-based trade, transparency, and supply chain resilience.
Collectively, these measures would demonstrate Malaysia's alignment with US trade priorities and may offer a pathway toward the reconsideration or reduction of the current tariff classification," it said.
Soh also stressed that the country's long-term resilience will depend on external diversification and sound domestic policies.
"Malaysian exporters are expected to face strong pressure from US importers to reduce their export prices to offset the 24% tariff imposed, further squeezing manufacturers' profit margins," he said.
At the same time, countries heavily impacted by the US tariffs may start diverting their goods to Malaysia and the Asean region, leading to a potential influx of cheaper imports," he added.
This, he said, would result in unfair competition for local industries if not carefully monitored and addressed through appropriate safeguards.
