SMEs and Tariffs!

Small and medium enterprises (SMEs) are bracing themselves for the full impact of the sweeping tariffs announced by the United States on April 2 over the coming months and are looking for ways to mitigate the risks. 

A tariff of 24% was imposed on Malaysia. But this may have a 90-day pause and key exemptions are made for semiconductors, wood products, copper and copper products, energy products and pharmaceuticals. According to Malaysia External Trade Development Corp data, electrical and electronics products comprise 54.6% of all exports to the United States.

 

SME Association of Malaysia estimated that the full impact of the tariffs would be felt in about three months. SMEs contribute an estimated 13% of Malaysia’s total exports. The SMEs that have felt an immediate impact include those in the furniture, food and beverage, information and communication technology industries and other businesses in the processed goods industries. 

Socio Economic Research Centre noted that SMEs could face significant disruptions as they rely on demand from larger export-oriented firms for orders and sub-contracts. Besides disrupting supply chains, lower demand resulting in reduced production capacity could lead to layoffs or even closures. 

SMEs importing goods would likely face indirect impact from second-order effects, given the interconnectivity of supply chains around the world and with retaliatory measures underway.

Overall, lower exports demand would result in lower production and would impact the employment and income of workers in the export-oriented industries and related supporting domestic SMEs along the supply chains, which will bear the bigger brunt of the impact. Grants, subsidies, tax breaks and emergency relief funds including low-interest loans and loans restructuring and rescheduling should be considered to support SMEs. 

The government should also help SMEs navigate the tariffs by providing guidance, while also working in tandem with business associations and chambers of commerce. Market diversification, source alternative suppliers and supply chain solutions are other steps. 

Reference:

SMEs seek opportunities post-tariff imposition, Fintan Ng, The Star, 9 April 2025