M'sian trade with China, US to strengthen despite uncertainties

Malaysia’s trade with both China and the United States is expected to strengthen, said the Finance Ministry.

In its Economic Outlook 2025 report released today, the ministry said trade would be driven by global economic dynamism and evolving trade policies.

It added that as Malaysia navigates the complexities of global trade, the country continues to adapt to shifting economic landscapes and utilise emerging opportunities.

“Malaysia’s commitment to open trade, together with its strategic and far-sighted economic policies, will position it well to sustain growth, enhance economic resilience, and remain competitive in the global market.

“While each engagement has its unique characteristics and benefits, the ties overall help Malaysia maintain a balanced and diversified trade portfolio and sustainable economic diversification, in line with the aspirations outlined in the Madani Economy framework,” the ministry said.

The Finance Ministry said Malaysia’s diversified export portfolio, encompassing a wide range of products and industries, enables the nation to mitigate risks associated with fluctuations in global demand and commodity prices, thereby contributing to its economic resilience.

As Malaysia’s largest trading partner, China plays a significant role in industrial and export activities, while the US, ranked third only after Singapore, contributes to high-value goods and technological innovations.

“Balancing these relationships enables Malaysia to enhance its global trade competitiveness and sustain robust economic growth,” it said.

Trade tension

The Finance Ministry said the trade tension between China and the US has posed challenges and opportunities for Malaysia.

It said Malaysia benefitted from the trade diversion arising from the relocation of industries from China and the US to the Southeast Asian region.

The semiconductor, telecommunications, and technology-related industries are Malaysia’s key beneficiaries of the investment diversion.

“In this regard, Malaysia continues to enhance competitiveness and streamline policy direction to remain an attractive investment destination in the region,” it said.

The ministry said that based on findings on the trade sensitivity analysis between Malaysia’s exports with China and the US using the gravity model, the country’s gross exports are more sensitive to the economic scenario in the US than in China.

Therefore, any policy shift towards protectionism, such as higher tariffs and new non-tariff measures in these two countries, could have repercussions on Malaysia’s external sector.

- Bernama

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