Kuala lumpur: CIMB Treasury and Markets Research economists have indicated that a segment of Malaysia’s semiconductor exports could be exempt from the United States’ proposed 100 percent tariff on imported chips. This potential exemption is attributed to the involvement of US firms and multinational corporations (MNCs) that depend on Malaysia’s semiconductor supply chain, coupled with their ongoing or planned capital investments in the US.
According to BERNAMA News Agency, Michelle Chia, the head of research, and senior economist Azri Azhar, highlighted that these exports are vital, considering that 65 percent of Malaysia’s semiconductor exports to the US are from US companies operating in the country. The remaining 35 percent, which includes firms with US affiliations, might also qualify for exemptions.
Chia and Azri noted that although the proposed tariff is significant, the exemption mechanism could shield Malaysia’s semiconductor sector. This is due to the substantial presence of US firms within Malaysia’s supply chain, along with other MNCs operating in both nations. They expressed these views in a note issued late Thursday.
Reports suggest that US President Donald Trump has threatened to levy a 100 percent import tariff on semiconductors, with possible exemptions for US companies transitioning production back to domestic grounds.
Chia and Azri highlighted that if the tariff implementation exceeds the base case of 65 percent exemptions, each additional 10 percent of affected semiconductor exports could result in a 0.29 percent reduction in Malaysia’s gross domestic product (GDP). They believe that the US may need to consider the intricate nature of the semiconductor supply chain, as production relocation would require significant time.
Furthermore, the analysts emphasized that the US administration will likely weigh the potential impact of increased tariffs on corporate earnings and consumer prices. However, they also suggested that in the long run, companies might be forced to relocate production, which could influence future investment decisions.
In 2024, Malaysia exported RM437.5 billion worth of semiconductor products globally, of which RM56.2 billion was directed to the US.