Uncertainty Over Semiconductor Exports

 

Malaysia faces the steepest growth risk in Asia from the United States’ looming sectoral semiconductor tariffs, as uncertainty over exemptions continues to cloud the sector’s prospects. Nomura’s baseline GDP growth forecasts for Malaysia are 4.4% for 2025 and 4% for 2026.

 

The US President Donald Trump threatened to impose a 100% tariff on semiconductor imports, with exemptions for companies that have committed to or are in the process of building manufacturing facilities in the United States. In April, the Trump administration launched a Section 232 investigation into semiconductors, which will assess whether imports threaten US security and allow the president to impose tariffs in response.

 

Source: https://simple.wikipedia.org

 

The administration has signalled plans to fast-track the review, with some reports suggesting results may be announced months ahead of the original December deadline – possibly as early as September.

 

The longevity of Asia’s low effective tariff rate (ETR) hinges critically on the timing of US tariffs on pharmaceuticals and semiconductors. Currently, it noted that given a higher share of exemptions, the ETRs are substantially lower for Singapore and Malaysia.

 

In electronics, Taiwan’s exposure is the highest in the region, with its ultimate exposure to the United States reaching 2.8% of GDP. Malaysia follows at 2.3% of GDP, with Singapore, South Korea and Thailand (1.3% to 1.4% of GDP each). Transitioning investment takes time in sectors like chips and pharmaceuticals and companies could face immediate margin pressure. Malaysian assembly and test plants would either have to absorb compressed margins or pass costs downstream, making final chips less price competitive.

 

Malaysia’s best strategy is to strengthen domestic capabilities, diversify sourcing, and pursue stable trade arrangements. UOB Research estimated an ETR of 24% on Malaysia’s semiconductor exports to the United States, based on certain assumptions. It assumes 68% of exports are taxed at 19%, about 11% at 100%, and the remaining 21% – linked to multinational semiconductor firms – are exempt. This exceeds the 19% reciprocal tariff rate.

 

The real impact of all this will be in 2026. It will negatively impact US inflation and GDP and the MAGA land will be devasted with poverty rather than prosperity. So, much for TACO Trump!

 

Reference:

Uncertainty looms over semiconductor exports, Elim Poon, The Star, 11 August 2025