KUCHING: Malaysia must respond decisively to safeguard its key industries and economic stability as the United States considers implementing a 24 per cent reciprocal tariff on selected imports.
Nivakan Sritharan, a lecturer from the Faculty of Business, Design and Arts at Swinburne University of Technology Sarawak Campus, urged Malaysia to adopt a strategy that blends regional diplomacy with domestic economic support.
He warned that without proactive measures, Malaysia’s major export sectors – particularly electronics and electrical (E&E) products, rubber-based goods, medical devices, and furniture – risk being severely affected by the proposed tariffs.
“These sectors are the backbone of Malaysia’s trade economy and are vital for employment. Malaysia can argue that penalising these sectors is counterproductive for both parties by presenting supporting evidence,” he told Sarawak Tribune.
He added that Malaysia should strategically position itself as an indispensable supply chain partner to the US, especially in areas such as semiconductors, medical equipment, and energy-efficient manufacturing.
Rather than taking a confrontational stance, he stressed that Malaysia should highlight how US industries rely on Malaysian inputs to promote cooperation over conflict.
He also emphasised that Malaysia must not negotiate in isolation.
“Bringing ASEAN together as a regional bloc provides greater bargaining power. A unified ASEAN voice on the unfairness of uneven tariff treatment across member states can pressure the US to reconsider its approach and reinforce the notion that regional harmony and economic integration are being disrupted,” he said.
Moreover, Nivakan said Malaysia could propose win-win solutions to Washington, such as welcoming US investments in return for tariff relief.
“By offering investment incentives – particularly in sectors aligned with US strategic interests like EVs, green tech, and digital services – Malaysia can frame the discussion as an opportunity rather than a confrontation.
“At the same time, Malaysia should consider pursuing a rules-based challenge through the World Trade Organisation (WTO) to maintain its international credibility.
“Even if such proceedings are slow, they send a clear signal of Malaysia’s commitment to fair trade practices under international norms.”
On the domestic front, he suggested that Malaysia consider short-term workarounds such as shifting some production or packaging activities to lower-tariff countries like Singapore.
He also highlighted the importance of expanding trade relationships with China and other members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US markets.
“Malaysia can invite Chinese representatives to visit, providing a timely opportunity to expand bilateral trade and investment agreements, which could offer economic cushioning in its discussions with the US,” he said.
In examining the broader economic impact, he noted that Malaysia’s E&E sector – heavily integrated into global supply chains – stands to suffer if production costs rise and US buyers shift to alternative suppliers in Vietnam or Mexico.
“This shift could lead to order cancellations, reduced export volumes, and a long-term erosion of market share.
“Similarly, the palm oil industry, while less reliant on the US compared to other markets, could still experience indirect consequences.
“For instance, higher tariffs may encourage US-based food and cosmetic manufacturers to source palm oil alternatives, potentially affecting global demand and prices,” he said.
To counter these risks, Nivakan proposed that Malaysian exporters diversify into emerging markets, especially within ASEAN, the Middle East, and Africa, where demand is growing and tariff regimes are more favourable.
He also called for a renewed focus on innovation and branding.
“For electronics, this includes moving up the value chain by investing in advanced manufacturing, product design, and compliance with international standards.
“In the palm oil sector, promoting sustainable certification and diversifying product applications — such as in biofuels and pharmaceuticals — can unlock new revenue streams and improve global acceptance,” he said.
He added that Malaysia’s participation in multilateral trade pacts such as the CPTPP and the Regional Comprehensive Economic Partnership (RCEP) also provides key leverage.
“These frameworks offer Malaysia alternative pathways for market access, supply chain integration, and trade strength by linking the country to large, diversified markets with reduced or eliminated tariffs among member nations.
“Through the CPTPP, Malaysia can strengthen trade ties with advanced economies such as Japan, Canada, Australia, and Mexico — many of which have stable, rules-based trade environments.
“This helps Malaysian exporters reduce over-dependence on the US market by accessing regions with more predictable policies and increasing consumer demand.”
Likewise, he said, the RCEP – which includes ASEAN, China, South Korea, Japan, Australia, and New Zealand – creates the world’s largest trading bloc and facilitates greater intra-Asian trade and investment.
“Malaysia can utilise RCEP’s harmonised rules of origin and reduced non-tariff barriers to streamline cross-border trade and enhance export competitiveness.
“For example, exporters of electronics and palm oil can benefit from simplified certification processes and cumulative value-added thresholds, making it easier to participate in regional value chains.”
To fully leverage these agreements, Nivakan said Malaysia must support its SMEs and export-oriented firms in understanding and applying the benefits offered.
“Government agencies such as MATRADE and MITI can play key roles in providing market intelligence, regulatory training, and business-matching services to help firms penetrate new markets.
“Strategically, Malaysia should also focus on building infrastructure and digital capabilities that enhance trade facilitation under these agreements,” he said.
