KUALA LUMPUR, May 6 — The Ministry of Investment, Trade and Industry (Miti) today revealed the findings of its impact analysis should negotiations with Washington fail to yield the desired result, as talks between Putrajaya and the United States began today.

The projection examined what Miti Minister Datuk Seri Tengku Zafrul Abdul Aziz described as the primary and secondary impacts if Malaysian exports to the US are subjected to the full 24 per cent tariff.

First level impact

1. Investors may divest and move to less exposed countries

Uncertainty stemming from President Donald Trump’s international trade policies could make Malaysia less attractive as a base for producing goods exported to the US, Zafrul said.

“This will likely drive investors to diversify towards less risky nations and possibly delay or even scale back investment into Malaysia,” the senator told a press conference at Miti’s head office here.

2. Supply chain disruption, cost inflation and order cancellations

Sectors expected to be impacted include electrical and electronics, electronics manufacturing services, and automotive spare parts, with Miti anticipating job losses for companies heavily reliant on the US market.

“This could then have a spillover effect on logistics and services,” Zafrul said.

3. Companies that have already invested in Malaysia may relocate

Some firms could consider reducing production, relocating back to the US to avoid tariffs, or moving to other countries with lower reciprocal tariffs.

“But the impact from this may be minimal as we are still studying. Some companies are affected minimally while it’s actually positive for others,” Zafrul said.

Second level impact

1. Risk of becoming a dumping ground for cheap products

Sectors such as textiles, aluminium, ceramics and steel could face increased competition from capital-intensive producers capable of producing large volumes at lower costs, particularly from China.

“We’ll see pressure on local companies and domestic competition on the cost front. Small firms without the capacity to produce and sell at scale will find it difficult,” Zafrul said, adding that this could lead to over-reliance on China and stifle innovation.

What are Miti’s counter-strategies?

Zafrul outlined Miti’s three-pronged strategy:

1. Bilateral talks with the US

Putrajaya’s trade representatives began formal negotiations with their American counterparts via video conference this morning, led by Miti deputy secretary-general (trade) Mastura Ahmad Mustafa. Zafrul said the ultimate goal is to achieve zero tariffs.

2. Regional and international engagement

Malaysia will leverage its chairmanship of the Association of Southeast Asian Nations (Asean) and continue engaging with other countries to mitigate the impact.

3. Support for affected sectors

Zafrul said incentives or aid would be provided for companies in sectors impacted by the tariffs.