CIMB Treasury and Markets Research economists believe that a portion of Malaysia’s semiconductor exports may qualify for exemption from the US’s 100% tariff on imported chips.
Its research head, Michelle Chia, and senior economist Azri Azhar said this is due to the presence of US firms and multinational corporations (MNCs) that rely on Malaysia’s chip supply chain and, at the same time, have ongoing or planned capital expenditure in the US.
Earlier today, investment, trade and industry minister Tengku Zafrul Aziz told the Dewan Rakyat that 65% of Malaysia’s semiconductor exports to the US originate from US companies operating in this country.
Chia and Azri said these exports, along with a portion of the remaining 35% from firms with US affiliations, may still qualify for exemptions.
“While the headline tariff is aggressive, the exemption mechanism may partially shield Malaysia’s semiconductor sector, given the significant presence of US firms operating within the domestic supply chain and other MNCs that are currently operating in both Malaysia and the US,” they said today.
According to reports, US President Donald Trump has threatened to impose a 100% import tariff on semiconductors, with exemptions for US companies relocating production back to the US.
Nevertheless, Chia and Azri noted that if tariff implementation is worse than the base case of 65% exemptions, every additional 10% of semiconductor exports affected could translate to a 0.29% drag on the gross domestic product (GDP).
They opined that in the short term, the US may need to recognise the complexity of the semiconductor supply chain and production relocation will take a considerable amount of time.
“We also believe that the US administration will be mindful of the potential impact of elevated tariffs on corporate earnings and consumer prices,” they said.
However, over the longer term, companies may be compelled to relocate production, potentially impacting investment decisions in the future, they added.
The analysts said Malaysia exported RM437.5 billion worth of semiconductor products globally in 2024, with RM56.2 billion destined for the US.
