PETALING JAYA: Malaysia’s small and medium enterprises must act fast to adapt to the new 25% US tariff on Malaysian exports or risk facing severe disruptions to their operations, cash flow and long-term competitiveness, economists warn.
Universiti Teknologi Mara (UiTM) Department of Economics and Financial Studies senior lecturer Dr Mohamad Idham Md Razak said the tariff will significantly raise the cost of doing business for Malaysian exporters targeting the United States – which is one of Malaysia’s largest trading partners.
“Export volumes may decline, resulting in lower revenue and possible cash flow problems, particularly for SMEs,” he said.
“Businesses need to rethink their strategies quickly. Those who are too reliant on the US will be the most vulnerable.”
He urged the government to provide immediate relief in the form of tax deferrals, subsidies or low-interest loans, while encouraging market diversification and improving export support for small firms.
“In the short term, they need help absorbing the cost increase. In the long run, we need to build resilience through diversification and higher-value products.”
Taylor’s University research cluster lead for innovative management practices Prof Dr Poon Wai Ching echoed this view, stressing that SMEs should use Malaysia’s existing trade frameworks to explore alternative markets in Asia, the Middle East, and Africa.
“SMEs must map their supply chains, improve cost efficiency, and open dialogue with US clients to better understand product demand,” she said.
“But ultimately, Malaysia’s small businesses must upgrade their product value, branding and innovation to move beyond low-cost export models.”
Poon also urged policymakers to increase funding for export promotion agencies such as Malaysia External Trade Development Corporation (Matrade) and ensure SMEs are supported in expanding internationally.
Universiti Putra Malaysia Putra Business School Assoc Prof Dr Ida Md Yasin said while larger firms are generally more equipped to weather global shifts, SMEs must be agile and innovative to survive.
“I’m not so worried about the big companies – they are usually good with the latest technology. But SMEs need to back up, especially when entering new markets,” she said.
“They must come up with innovative products and productive processes to compete globally.”
Drawing an analogy, Ida said: “A big company is like a large ship – it takes time to manoeuvre.
“But an SME can pivot faster, if its leadership is ready to act. That speed is what will determine survival in this new trade environment.”
The warning comes after US President Donald Trump announced that Malaysian exports to the US will face a 25% tariff – which had been under a 90-day pause – starting Aug 1, up from 24% previously.
In a letter addressed to Prime Minister Datuk Seri Anwar Ibrahim and posted on Trump’s Truth Social platform, the US president described the tariff as “far less than what is actually needed” to correct the US trade deficit with Malaysia.
“Malaysia’s current trade policies have made our trading relationship largely one-sided and non-reciprocal,” Trump said, warning that any retaliation such as raising tariffs on US imports would trigger an additional 25% tariff.
He suggested that Malaysian companies could avoid the tariffs by relocating or setting up manufacturing operations in the US, offering to fast-track necessary approvals.
