The share of Malaysia's exports to the United States that are subject to reciprocal tariffs has fallen sharply from the equivalent of 12.4 per cent of gross domestic product (GDP) to 4.6 per cent, analysts said.
This comes as a larger portion of Malaysian goods now qualify for tariff exemptions, which have increased from 46.5 per cent to 62.8 per cent of exports to the US, one of the highest exemption levels in Asean.
CGS International Securities Malaysia Sdn Bhd analysts Jeremy Goh and Prem Jearajasingam said the improvement follows Malaysia's designation as one of Washington's "aligned partners".
"Prior to the signing of the Agreements on Reciprocal Trade (ART), there were already three rounds of broad-based reciprocal tariff exemptions," they said in a Malaysia Strategy note.
"We estimate this to account for 46.5 per cent of Malaysia's exports to the US in 2024. With the new exemptions for aligned partners, cumulative exemptions have risen to 62.8 per cent by our calculations, which is one of the highest in Asean," they added.
TARIFF PRESSURES EASING
The analysts said tariff tensions have eased significantly from their "Liberation Day peak".
After negotiations with several countries, the US announced on July 31 adjustments to its reciprocal tariffs, mostly at lower levels compared to those proposed on April 2.
Within Asean, the average reciprocal tariff was cut from 33 per cent to 23 per cent.
Malaysia's rate was reduced from 24 per cent to 19 per cent, placing it on par with Cambodia, Thailand, the Philippines and Indonesia (all 19 per cent), while Vietnam stands at 20 per cent.
Goh and Jearajasingam said episodes of "tariff tantrums" could still occur but the broader direction points to de-escalation.
They highlighted several key developments, including the maintenance of the US-China truce, the delay in the semiconductor tariff investigation and recent court rulings that are constraining tariff powers.
EXEMPTIONS RAISED AFTER ART SIGNING
During US President Donald Trump's visit to Malaysia from Oct 26 to 27 for the Asean-US and East Asia Summits, Washington signed ART agreements with Malaysia and Cambodia and announced negotiation frameworks with Thailand and Vietnam.
Under the pact, Malaysia will reduce or eliminate tariffs on nearly all US exports and provide non-discriminatory market access for US agricultural and industrial goods, among others.
The country will also address non-tariff barriers and make commercial purchases including liquefied natural gas, coal, aircraft, semiconductors and data-centre equipment.
Both countries also signed a memorandum of understanding to expand cooperation in critical minerals.
In return, Malaysia, along with Cambodia, Thailand and Vietnam, was designated an aligned partner eligible for additional exemptions.
Goh and Jearajasingam said before the ART, the three rounds of broad-based exemptions announced in April and September already covered 46.5 per cent of Malaysia's exports to the US in 2024.
With the aligned partner exemptions added, Malaysia's cumulative exemption rises to 62.8 per cent.
"In turn, these exemptions reduce Malaysia's exports exposed to US reciprocal tariffs from the equivalent of 12.4 per cent of GDP to 4.6 per cent," the analysts said.
Source: New Straits Times
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<p>Time: November 2025<br /> By: WTO and International Trade Group, Legal Department – VCCI</p>
