Malaysia warns of global supply chain disruptions if U.S. ends chip tariff exemptions

Malaysia has warned that removing ￰0￱ exemptions on its semiconductor exports could hurt its global competitiveness and strain interconnected supply ￰1￱ announcement came as the country revealed its budget report for the 2026 fiscal ￰2￱ imposed a 19% tariff on Malaysian goods in August as part of President Donald Trump’s ongoing tariff ￰3￱ August levy on Malaysia exempted certain products, such as semiconductor materials, which are currently being reviewed in the U. S. Malaysia’s $114 billion budget targets growth as ￰4￱ weigh on economy According to the latest economic outlook budget report for Malaysia’s fiscal year 2026, removing the semiconductor exemptions may result in multiple challenges for the country, including reducing its competitiveness and straining sectors closely related to ￰5￱ ￰6￱ country ranks sixth globally as a semiconductor exporter to the ￰7￱ country hosts multinational chip assembly and testing operations that supply most ￰8￱ ￰9￱ to a Reuters report , Malaysia’s 2026 economic outlook budget valued expenditures at $114.4 billion, a 14% increase from the 2025 revised ￰10￱ expenditures received 338.2 billion ringgit, while development projects received 81 billion ￰11￱ investments are expected from state-linked ￰12￱ Minister Ibrahim Anwar has made several policy shifts since taking office, including the removal of petrol subsidies and a minimum wage ￰13￱ said that the subsidy removal could generate annual savings of up to 15.5 billion ￰14￱ noted that this year’s fuel subsidy removal has already saved 5 billion ￰15￱ has reduced its fiscal deficit to 3.5% of the GDP from 3.8% this ￰16￱ also highlighted a projected 2.7% rise in revenue to 343.1 billion ￰17￱ 2026 budget also projected moderate inflation, at 1.3% to 2%, with monetary policy expected to support ￰18￱ has also faced a slump in the Petroleum industry, primarily due to U.

S. tariffs. Petronas, a state-owned firm, confirmed that it will pay a 20 billion ringgit dividend, marking its lowest since 2017. Malaysia’s financial report indicated that the tariffs are already weighing on its economic outlook, with projections that gross domestic product (GDP) growth could decline by 0.76 percentage points due to the new trade ￰19￱ says Washington should reconsider tariffs on Malaysian semiconductors The US-Asean Business Council warned that Washington’s imposition of tariffs on semiconductor materials could disrupt global supply chains and harm American ￰20￱ Bernama covered the story two weeks ago, citing remarks by Marc Mealy, Executive Vice President of the US-ASEAN Business ￰21￱ acknowledged that Malaysia is crucial in the semiconductor chip supply chain globally, particularly in testing, assembly, and ￰22￱ added that many components pass through the country before reaching the ￰23￱ Donald Trump had proposed imposing 100% tariffs on semiconductor chips.

However, Mealy argued that imposing 100% to 300% levies on semiconductor chips could lead to supply disruptions and slow vehicle and electronics production in the ￰24￱ ￰25￱ executive VC urged the Trump administration to adopt a targeted, strategic approach rather than blanket ￰26￱ also noted that Malaysia’s role in global chip manufacturing makes indiscriminate measures risky for both ￰27￱ to the ASEAN Bernama report , Malaysia supplied about 15% of the semiconductors used in the ￰28￱ sector, valued at 52.11 billion ringgit in exports last ￰29￱ to a report by the American Enterprise Institute, the ￰30￱ about $40 billion worth of chips in 2024, mainly from Taiwan, Malaysia, Israel, South Korea, Ireland, Vietnam, Costa Rica, Mexico, and China.

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