10/07/2025

BIZ & FINANCE THURSDAY | JULY 10, 2025

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FMM calls for bold reforms to counter levy blow PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) has urged the government to act swiftly and decisively as a coordinated response to the United States’ decision to impose a 25% blanket tariff on most Malaysian goods entering the US market, with certain exemptions, from Aug 1. FMM president Tan Sri Dato’ Soh Thian Lai warned that the tariff risks further destabilising an already fragile industrial landscape, besides severely undermining export competitiveness and straining manufacturers. “With strong government-industry collaboration, clear and timely policies, and bold structural reforms, Malaysia can preserve its manufacturing leadership, withstand short-term shocks, and chart a sustainable path forward,” said Soh in a statement yesterday. Soh said the announcement came as a surprise since intensive negotiations were ongoing between Washington and the Ministry of Investment, Trade and Industry (MITI) through the National Geoeconomic Command Centre (NGCC). He said that the manufacturing sector is already burdened by a previous 10% tariff, along with rising costs from the expanded Sales and Service Tax (SST) and electricity base tariff hikes. Soh said feedback from manufacturers indicated the 10% tariff had already threatened the sustainability of export operations. He said many feared further hikes would lead to steep shipment declines and eroded profit margins. He said that while critical products like semiconductors are exempt, supporting industries, such as suppliers of parts, machinery and services, remain exposed to significant disruption. He added that key export segments such as rubber products, textiles, furniture and industrial components will also be adversely affected. “Although Malaysia’s initial proposed 24% tariff in April was lower than those of peers like Cambodia, Vietnam and Thailand, the new blanket 25% rate places Malaysia in a more punitive position.” Soh highlighted that Vietnam has negotiated a reduced 20% rate, while Singapore, Brunei and the Philippines were excluded entirely from the latest round. FMM urged the government to intensify diplomatic engagement to secure a deferral or rollback of the tariff, citing Malaysia’s vital role in US and global supply chains. It called for the country’s compliance record, investment linkages and value-added contributions to be strongly asserted. Domestically, FMM is pressing for targeted financial relief, export promotion and structural reforms to improve cost efficiency. Among its key demands is SST reform, including a business-to-business service tax exemption for licensed manufacturers. “The absence of a business-to-business exemption mechanism means service tax is imposed on critical production-related services such as logistics, warehousing, leasing, and contract processing resulting in cascading tax effects that not only inflate production costs but ultimately pass through to consumers. “This undermines tax neutrality, distorts input choices, and reduces Malaysia’s industrial and export competitiveness,” said Soh. FMM proposed measures such as raising the Market Development Grant ceiling, waiving Matrade fees for association-led trade missions, and supporting exporters in branding, certification and digital access. It also recommended tax incentives for automation and digitalisation, a Madani Manufacturing Digitalisation Grant for SMEs, and low-interest financing backed by workforce upskilling to accelerate Industry 4.0 adoption. To harmonise regional responses to trade shocks and strengthen intra-Asean production links, FMM suggested the swift establishment of a National Supply Chain Council and a dedicated Asean Supply Chain Coordination Council under Malaysia’s Asean chairmanship. It urged the government to fast-track the Malaysia-European Union Free Trade Agreement and pursue trade partnerships in Africa, Latin America and the Middle East to reduce overreliance on any single export destination and to reinforce Malaysia’s global competitiveness. Ű BY T.C. KHOR newsdesk@thesundaily.com

US tariffs pose ‘economic earthquake’ for SMEs o Samenta urges govt to quickly roll out support measures

development financial institutions, and the RM50 million boost to Matrade. “These initiatives must be delivered quickly and with minimal red tape.” Ng said more importantly, these relief measures must be extended to domestic, non-exporting businesses. The anticipated tailwinds from subdued exports and weaker domestic demand will affect the services sector in equal intensity, he said. “In particular, we urge the government to pause all new and planned cost increases on SMEs, including the proposed rationalisation of petrol subsidy and incremental fees proposed by various agencies and local councils. “As labour shortages remain one of the most pressing challenges, particularly in the services sector, we urge the government to urgently review and ease restrictions on the hiring of foreign workers in sectors such as food services, tourism, and logistics. “With our export momentum set to face headwinds, supporting our service-based SMEs to absorb the slack will be crucial in maintaining our economic resilience,” Ng said.

KUALA LUMPUR: The Small and Medium Enterprises Association (Samenta) views the 25% tariff imposed by the US on Malaysian exports as a serious threat to the country’s trade competitiveness and industrial base, especially for export-oriented SMEs that form the backbone of the domestic manufacturing ecosystem. Samenta national president Datuk William Ng said the new tariff is the equivalent of an “economic earthquake” for domestic SMEs that are significantly exposed to the US market. He said Samenta has consistently pointed out that Malaysia’s headline economic growth often masks deeper structural weaknesses within the SME sector. “The real paradox is our ability to register macro-level gains while most SMEs remain trapped in low-margin, low-scale operations – squeezed by rising costs, regulatory pressures, and now, geopolitical shocks.

“The imposition of US tariffs is a stark reminder of the urgent need to recalibrate our economic model to prioritise the long-term viability and competitiveness of our 1.5 million SMEs, with the creative and service economy at the heart of it,” he said in a statement. Ng stated that Samenta is fully committed to collaborating with the government to provide support to all SMEs, whether directly or indirectly impacted by the tariff. “We acknowledge the government’s continued pursuit of a ‘balanced and mutually beneficial’ trade resolution with Washington, but we need urgent and coordinated action to cushion the impact on impacted SMEs. “Samenta is hopeful that the government will expedite the roll-out of previously announced targeted support measures, particularly the RM1 billion increase in SJPP guarantees, RM500 million in soft loans via

A DHL warehouse in Seksyen 23, Shah Alam yesterday. – BERNAMAPIC

Malaysia still has time to secure better trade terms: CIMB Securities KUALA LUMPUR: Malaysia still has time to negotiate better terms following the United States decision to defer its tariff enforcement date to Aug 1, 2025, from the earlier scheduled date of July 9, CIMB Securities Sdn Bhd said. Trump’s decision to impose a 25% tariff on Malaysian exports – exceeding the earlier reciprocal tariff rate of 24% – adds to external headwinds, particularly for export-oriented sectors such as electronics, machinery, gloves, and furniture, which have significant exposure to the American market. For now, CIMB Securities is maintaining its 4.3% GDP growth forecast, pending greater clarity ahead of the new enforcement deadline, but with a clear downside bias if trade talks fail to yield a more favourable outcome.

In a note yesterday, the research firm said the US had signalled that the tariff rate could be adjusted downward if Malaysia agreed to remove specific tariff and non-tariff barriers or committed to direct investments in American manufacturing facilities. It noted that the market had expected a lower tariff rate, especially after Vietnam successfully negotiated a reduced rate of 20%, compared to its earlier reciprocal tariff of 46%. However, the firm said US President Donald

Nonetheless, the research firm said it is maintaining its KLCI earnings forecasts and index target of 1,560 points, with the impact of higher American tariffs already factored into its projections. “We expect the KLCI to remain range-bound in the near term, with downside risks as the market assesses Malaysia’s prospects of negotiating lower tariff rates,” the firm added. – Bernama

“This development poses downside risks to our 2025 gross domestic product (GDP) growth forecast of 4.3%, which is premised on a more moderate 10% tariff scenario. “Earlier simulations suggest that a 24%–25% tariff could reduce growth by up to 0.3 percentage point (pp), implying a revised baseline of around 4% in the absence of a better deal,” it said.