FMM president Soh Thian Lai said the latest move under the US’s reciprocal tariffs, set to take effect on Aug 1, came as a surprise given the intensive and ongoing negotiations coordinated by the investment, trade and industry ministry (Miti).
“This latest escalation risks further destabilising an already fragile industrial landscape, severely impacting export competitiveness and placing additional strain on manufacturers,” he said in a statement.
Miti earlier said Putrajaya remained committed to continued engagement with the US on a “balanced” and “mutually beneficial” trade agreement despite the announcement of the 25% tariff on Malaysian goods.
Soh said manufacturers were already struggling under a previous 10% US tariff and rising domestic costs, including the expanded sales and service tax (SST) and electricity tariff revision.
He said feedback from manufacturers during the initial implementation of the 10% tariff already pointed to serious concerns over the sustainability of export operations.
“Many warned that further tariff hikes would result in significant declines in shipments and severe erosion of profit margins.”
The 25% tariff, he added, was expected to intensify these pressures, particularly for companies operating on thin margins or bound by long-term contracts.
While some critical products such as semiconductors were exempted, Soh noted that the broader ecosystem supporting the semiconductor industry – such as suppliers of parts, machinery and services – remained exposed to disruption.
He also expressed concern over Malaysia’s growing disadvantage in the evolving tariff landscape, pointing out that Vietnam had secured a bilateral arrangement reducing its rate from 45% to 20%.
“These disparities risk diverting US sourcing to lower tariff alternatives and eroding Malaysia’s market share.
“Our compliance record, investment linkages and value-added contribution should form the basis for seeking targeted relief or differentiated treatment to prevent long-term structural damage to Malaysia’s export position,” he said.
Soh said it was critical that Malaysia’s case be urgently and clearly elevated at the highest levels of US policymaking, supported by strong data and strategic positioning to highlight the nation’s role in global supply chains.
Domestic measures needed
Soh also said domestic countermeasures must be rolled out to support affected industries, including targeted financial relief, strengthened export promotion, and fast-tracked structural reforms to enhance cost efficiency and competitiveness.
“The long-term solution must be the creation of a tax framework that fully removes the tax-on-tax element and restores neutrality across the manufacturing supply chain,” he said.
Beyond immediate reforms, Soh urged for structural interventions to strengthen trade competitiveness and resilience, including enhanced export facilitation, incentives for branding and digital access, and tax breaks for investments in automation and robotics.
“To build long-term supply chain resilience, a National Supply Chain Council must be swiftly established,” he said, adding that Malaysia should lead efforts under its Asean chairmanship to create a regional Supply Chain Coordination Council.