In response to US tariffs, Malaysia unveils US$356 million SME relief measures

The US tariffs will ‘certainly have a significant impact’ on Malaysia’s exports and economy, Prime Minister Anwar Ibrahim says

Washington’s “baseless and harmful” tariffs have forced Malaysia’s Prime Minister Anwar Ibrahim to unveil 1.5 billion ringgit (US$356 million) of relief measures for small businesses affected by the snowballing trade war.

Tariffs announced in April by US President Donald Trump have rattled global markets, drawn criticism from Washington’s trade partners and prompted fears of a prolonged trade war that could squeeze exporters, disrupt supply chains and curb economic growth.

The US accounted for 13 per cent of Malaysia’s total exports in 2024, at 199 billion ringgit (US$47.5 billion). The Southeast Asian country ran a surplus with its third-largest trade partner last year, with imports from the world’s biggest economy totalling 126 billion ringgit (US$30 billion).

Malaysia was hit with a 24 per cent tariff on virtually all US-bound exports, apart from semiconductors and some other electronics items. With Washington having paused its sweeping tariffs on almost all its trade partners for 90 days, Malaysia has less than two months to negotiate a trade deal with the Trump administration.

On Monday, Anwar rejected Washington’s claim that Kuala Lumpur had imposed a 47 per cent tariff on US goods, calling the allegation “not based on sound economic theory”.

“However, as one of the country’s largest trading partners, the United States’ decision will certainly have a significant impact on Malaysia’s export performance, thereby affecting GDP growth,” Anwar told lawmakers at a special parliamentary session to discuss the trade impasse with Washington.

Anwar said the government would increase its loan guarantee ceiling by 1 billion ringgit (US$237 million) to help small and medium enterprises (SMEs) secure bank loans. An additional 500 million ringgit (US$119 million) of soft loans will also be available for SMEs affected by the tariffs to tap through development financial institutions.

Defined as businesses with an annual turnover of less than 50 million ringgit (US$11.92 million) each, SMEs account for almost half of Malaysia’s economy and employ half of its workforce.

Semiconductors, which make up a major share of Malaysia’s electronics exports, are exempt from the tariff. But other electrical and electronic products, which account for nearly a third of Malaysia’s US-bound exports, are affected by the US levy.

Several Southeast Asian economies that are reliant on exports to the US are reeling from Washington’s so-called “reciprocal tariffs”. Aside from Malaysia, Vietnam and Cambodia were each slapped with 46 and 49 per cent tariffs, respectively.

The White House has said its concern is not about the tariffs themselves, but with what it describes as persistent non-tariff trade barriers imposed by Southeast Asian countries. It has cited opaque regulatory standards, local content requirements, and preferential treatment for domestic firms as obstacles impeding fair competition and putting American businesses at a disadvantage.

In a recent report on foreign trade barriers, the Office of the US Trade Representative has identified several Malaysian policies as problematic, including a preference for locally manufactured pharmaceuticals, lax intellectual property protection, and overly stringent halal meat import requirements.

The report also criticised Malaysia’s automotive policy for imposing high duties on foreign vehicles to shield national carmakers Proton and Perodua, and flagged concerns over digital freedom arising from several measures of the Malaysian Communications and Multimedia Commission.

Anwar, however, said the US had shown willingness to engage in trade talks with Malaysia, raising hopes for a possible reduction in the tariff rate.

“It is reiterated that this process is still in its early stages, without any agreement being finalised by both parties,” he added.