Kuala lumpur: Malaysia still has time to negotiate better terms following the United States (US) decision to defer its tariff enforcement date to August 1, 2025, from the earlier scheduled date of July 9, CIMB Securities Sdn Bhd said. In a note today, the research firm highlighted the opportunity for Malaysia to engage in negotiations that could lead to more favorable trade conditions.

According to BERNAMA News Agency, the US had indicated that the tariff rate could potentially be adjusted downward if Malaysia agreed to remove specific tariff and non-tariff barriers or committed to direct investments in US manufacturing facilities. The market had anticipated a reduced tariff rate, especially after Vietnam managed to negotiate a lower rate of 20 percent, a significant drop from its initial reciprocal tariff of 46 percent.

However, the firm pointed out that US President Donald Trump’s decision to impose a 25 percent tariff on Malaysian exports, which surpasses the earlier reciprocal tariff rate of 24 percent,
presents challenges, particularly for export-oriented sectors such as electronics, machinery, gloves, and furniture that have considerable exposure to the US market.

“This development poses downside risks to our 2025 gross domestic product (GDP) growth forecast of 4.3 percent, which is premised on a more moderate 10 percent tariff scenario,” CIMB Securities stated. “Earlier simulations suggest that a 24-25 percent tariff could reduce growth by up to 0.3 percentage points, implying a revised baseline of around 4.0 percent in the absence of a better deal.”

Currently, CIMB Securities is maintaining its 4.3 percent GDP growth forecast, awaiting more clarity before the new enforcement deadline, but with a clear downside bias if trade talks do not result in a more favorable outcome. Despite the uncertainties, the research firm is maintaining its KLCI earnings forecasts and index target of 1,560 points, with the impact of higher US tariffs already considered in its projections.

“We expect the KLCI to remain range
-bound in the near term, with downside risks as the market evaluates Malaysia’s potential to negotiate lower tariff rates,” the firm added.