KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has expressed strong concern over the United States' decision to impose a 25 per cent blanket tariff on all Malaysian imports, effective Aug 1.
The move, which follows an earlier 10 per cent reciprocal tariff is expected to significantly disrupt Malaysia's export competitiveness and industrial resilience. It is seen as a major blow to the already pressured manufacturing sector.
In a statement, FMM said the 25 per cent tariff would intensify pressure across the board, particularly for companies operating on thin margins or bound by long-term contracts, further compounded by rising domestic costs such as electricity and service tax hikes.
Its president Tan Seri Datuk Soh Thian Lai said the latest escalation risks further destabilising an already fragile industrial landscape, citing added costs, market uncertainty, and weakened competitiveness.
"While semiconductor-related products are exempt, supporting industries such as parts, machinery, and materials remain vulnerable to export disruption. Sectors like rubber products, textiles, and furniture are among those likely to be hardest hit," he said.
Soh added the new tariff places Malaysia at a disadvantage compared to peers like Vietnam, which has secured a bilateral deal reducing its tariff to 20 per cent.
Other Asean nations, including Singapore, Brunei, and the Philippines, were not included in the US tariff hike.
"Our compliance record, investment linkages and value-added contribution should form the basis for seeking targeted relief or differentiated treatment to prevent long-term structural damage to Malaysia's export position.
"Given these mounting risks and Malaysia's increasingly disadvantaged position compared to regional peers, FMM urges the government to immediately intensify its diplomatic and policy response," he added.
FMM also called for urgent domestic reforms to improve cost efficiency and manufacturing resilience.
This includes a comprehensive review of the Sales and Service Tax (SST) framework, especially after the July 1 expansion that saw service tax imposed on a wide range of logistics and production-related services.
"These cascading tax effects not only inflate production costs but ultimately pass through to consumers, adding that the current structure undermines tax neutrality and reduces industrial competitiveness.
"FMM strongly urges the government to immediately review and reform the SST structure by introducing a business-to-business service tax exemption for licensed manufacturers, automatically applied upon provision of a valid Sales Tax licence number.
"The long-term solution must be the creation of a tax framework that fully removes the tax-on-tax element and restores neutrality across the manufacturing supply chain," he said.
Beyond tax reform, FMM emphasised the need for Malaysia to urgently strengthen its trade competitiveness and domestic resilience through coordinated structural interventions.
The association recommends enhancing export facilitation by raising the market development grant ceiling and eliminating administrative fees imposed by the Malaysia External Trade Development Corp for trade missions led by industry associations.
These measures, Soh said, would ease the burden on exporters, particularly small and medium enterprises, and improve market access for Malaysian products globally.
A key proposal also includes introducing a Madani manufacturing digitalisation grant, aimed at helping small and medium enterprises transition to smart production systems, supported by access to low-interest financing for technology upgrades.
On the international front, Soh said Malaysia must expand its trade links by concluding pending agreements such as the Malaysia-European Union Free Trade Agreement, while exploring new opportunities with emerging markets in Africa and Latin America.
"We must act decisively to preserve our manufacturing leadership and long-term competitiveness and remain committed to working closely with all stakeholders to safeguard Malaysia's place as a competitive, resilient, and globally trusted trading partner," he added.