US Tariffs and Re-globalization: Frost & Sullivan Highlights Malaysia’s Strategic Path Amid Global Trade Shifts

Kuala Lumpur, 14 April 2025 - As global trade dynamics shift following the United States' sweeping tariff measures announced on April 2, Frost & Sullivan emphasizes that Malaysia is well-positioned to navigate the evolving landscape by deepening regional and global trade partnerships, boosting domestic resilience, and leveraging its current import-heavy relationship with the US to pursue favourable bilateral negotiations.

While Malaysia has not been directly targeted by the new tariffs, its position as an integrated regional economy makes it susceptible to ripple effects. The country is responding constructively, requesting a recalculation of its actual trade deficit with the US, which Malaysian authorities assert is closer to 5.6%, significantly lower than previously estimated figures.

"Asia-Pacific's response to 'Trump 2.0' tariffs prioritizes negotiation over retaliation while bolstering growth through domestic policy support," said Hazmi Yusof, Country Head, Malaysia & Senior Vice President Emerging Markets, Frost & Sullivan Malaysia. "Malaysia's strategy hinges on proactive diplomacy and market agility enabling it to stay resilient while others brace for sharper shocks."

Unlike some export-heavy economies, Malaysia's diversified economic base and status as a net importer of goods from the US reduce its exposure to direct tariff shocks. This may ease the path to pragmatic bilateral negotiations and soften the overall economic impact. In addition, Malaysia is reinforcing efforts to strengthen domestic consumption and drive private and public sector investments to cushion external pressures.

"Under this pessimistic scenario, global GDP could slip to 2.4%, intensifying fears of a synchronized trade-led downturn," Hazmi Yusof added. "Asia-Pacific (excluding China) GDP is projected to slow to 2.7%, down from pre-tariff expectations of over 3.0%. Vietnam could see its growth decline by 0.8 percentage points. Japan and South Korea also face projected GDP downgrades of 0.5 to 0.4 percentage points, respectively."

To chart a forward-looking path, Frost & Sullivan recommends the following strategies for Malaysia:

• Export Market Diversification: Accelerate efforts to tap into emerging markets in Africa, the Middle East, and South Asia to reduce reliance on traditional trading partners.
• Expansion of Free Trade Agreements: Leverage and expand regional FTAs, including ASEAN, CPTPP, RCEP, and strategic dialogues with the EU and BRICS nations.
• Domestic Demand Stimulation: Drive national consumption and investment policies to ensure a stable foundation for growth amid external uncertainties.
• Trade Deficit Re-evaluation: Use current negotiations to push for fairer accounting of trade balances, supporting Malaysia's case for exemption or special treatment.

"Malaysia's diversified economic structure gives it strategic flexibility," Hazmi noted. "We expect that combining trade diplomacy, local demand growth, and FTA leverage will allow Malaysia to sustain forward momentum and attract redirected investments."

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Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.