The BGA Malaysia Team, led by Senior Director Sadiq Noor Azlan, wrote a client update on Malaysia’s response to the U.S. tariffs.

Context

  • Malaysian Investment, Trade and Industry Minister Tengku Zafrul Tengku Abdul Aziz led a delegation to Washington, D.C., for a three-day working visit starting April 22. Members sought to formalize channels and build relationships with their U.S. counterparts as Malaysia prepares to negotiate the reciprocal tariffs imposed by the United States. BGA intelligence understands that the engagements with U.S. Secretary of Commerce Howard Lutnick and U.S. Trade Representative (USTR) Jamieson Greer were broadly positive and have encouraged further discussions to negotiate a potential reduction of the tariff imposed on Malaysia.
  • The discussions held with Lutnick and Greer touched on Malaysia’s role in the global supply chain and Washington’s willingness to negotiate tariff reductions. The Malaysian delegation identified five priorities during the meetings: cutting the trade deficit, easing nontariff barriers, strengthening technological safeguards, expanding Malaysian investment in the United States and exploring a bilateral trade agreement. Malaysia is expected to return for the second round of negotiations later this month, with Mastura as chief negotiator.

Significance

  • Prime Minister Anwar Ibrahim recently announced the formation of the National Geoeconomic Command Center (NGCC), which aims to address the impact of global geopolitical events on Malaysia’s economy and national interests. The NGCC convened three times in the past month to discuss the impact of the tariffs and Malaysia’s approach to mitigate shocks to the economy. The latest meeting presented the outcomes of Zafrul’s discussions with Lutnick and Greer.
  • Malaysia will seek to increase imports from the United States as part of an immediate measure to reduce the U.S. trade deficit with Malaysia. Malaysia’s national flag carrier, Malaysia Aviation Group, has committed to purchase 30 Boeing aircraft, with an option for an additional 30 jets. Malaysia may also expand the procurement of big-ticket items from the United States, including defense and security assets. In parallel, the government will support additional investments into the United States by Malaysian government-linked companies and private conglomerates.

Implications

  • In the interest of technology and energy security, Malaysia plans to expand its safeguards and collaborative efforts related to strategic trade, including for artificial intelligence (AI) chips; rare and critical minerals; and energy, such as oil and gas. A technology safeguard agreement has also been proposed as the United States tightens up on AI diffusion.
  • The Malaysian government is mulling the development of a special incentive package to support businesses that the tariffs have impacted. This will act as a contingency measure to hedge risks to the domestic economy in case negotiations with the United States break down. The special incentive package will be finalized after the tariff negotiations have concluded, with the incentives subject to the outcome of the discussions and the country’s fiscal position.

We will continue to keep you updated on developments in Malaysia as they occur. If you have any comments or questions, please contact BGA Malaysia Senior Director Sadiq Noor Azlan at msadiq@bowergroupasia.com.

Best regards,

BGA Malaysia Team

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Senior Director

Sadiq brings his deep understanding of political dynamics and ability to recognize key government stakeholders to his role as director for BGA Malaysia. Sadiq joined BGA in mid-2019, after serving as special officer to the minister of finance under two different administrations. In addition to advising on topics ranging from the country’s annual budget, legislative procedures, subsidy rationalization and election campaigns, he managed engagement with other ministries, private and public agencies, government-linked companies and multinational corporations, foreign leaders, business chambers, media personnel and politicians. Sadiq obtained his bachelor’s degree in economics from the University of Massachusetts Amherst. He spent over ... Read More