FMT:
Impractical to expect manufacturers to reshore to US, says biz group
4 hours ago
Rex Tan
MICCI says US president Donald Trump’s suggestion to avoid tariffs is not commercially viable for local manufacturers
Malaysian businesses should focus on building resilience, scalability, and long-term competitiveness, rather than reacting to “policy short-termism”, says Samenta’s William Ng. (File pic)
PETALING JAYA: Malaysian manufacturers should not be expected to shift their production to the US to avoid newly imposed tariffs, a key business group has said.
In a statement to FMT, the Malaysian International Chamber of Commerce and Industry (MICCI) described the proposal, associated with US president Donald Trump, as impractical for most local firms.
While large multinationals with deep capital reserves and global footprints may benefit from it, MICCI said such a move would pose a major obstacle for small and medium enterprises (SMEs), the backbone of Malaysia’s industrial sector.
It said that setting up production in the US would create substantial cost pressures, including through higher labour and raw material expenses, as well as foreign exchange risks, given the strength of the US dollar against the ringgit.
“For many businesses, the compounded effect of these factors could easily outweigh any tariff relief and undermine business sustainability,” the statement said further.
“It is simply not a commercially viable solution for most Malaysian manufacturers.”
The group stressed that relocating production is a complex, long-term investment that requires careful evaluation of supply chain readiness, customer proximity, access to skilled labour, and long-term cost stability.
Instead, MICCI urged the government to strengthen Malaysia’s trade position through diplomatic engagement with the US.
It also called for greater support for local manufacturers via incentives for digitalisation, automation and export market diversification.
On July 7, the US announced a 25% tariff on Malaysian goods effective Aug 1. In a letter to Prime Minister Anwar Ibrahim, Trump said the tariff was necessary to address the “unsustainable” US trade deficit with Malaysia, which he described as a threat to the US economy and its national security.
Pointing out that no tariffs would be imposed if Malaysian companies chose to manufacture in the US, Trump promised to fast-track approvals to facilitate relocation to US shores.
However, the Small and Medium Enterprises Association of Malaysia (Samenta) urged policymakers and businesspeople not to place too much emphasis on Trump’s suggestion, adding that national policy should not be dictated by foreign political cycles.
Samenta chairman William Ng told FMT that Malaysian businesses should instead focus on building resilience, scalability, and long-term competitiveness, rather than reacting to “policy short-termism”.
He acknowledged that co-investments and strategic partnerships with US entities may make sense for selected large firms and high-margin producers.
Such businesses should receive government backing on a case-by-case basis, he said, especially if they result in job creation or technology transfers that benefit Malaysia.
“But I can’t think of many Malaysian brands or products that would thrive under such arrangements. This highlights the urgent need for us to innovate and move beyond being mere assemblers,” he said.
“For the vast majority of Malaysian manufacturers, especially SMEs, relocation is not a viable option. Costs for raw materials, labour, compliance and land are far higher in the US.
In a statement to FMT, the Malaysian International Chamber of Commerce and Industry (MICCI) described the proposal, associated with US president Donald Trump, as impractical for most local firms.
While large multinationals with deep capital reserves and global footprints may benefit from it, MICCI said such a move would pose a major obstacle for small and medium enterprises (SMEs), the backbone of Malaysia’s industrial sector.
It said that setting up production in the US would create substantial cost pressures, including through higher labour and raw material expenses, as well as foreign exchange risks, given the strength of the US dollar against the ringgit.
“For many businesses, the compounded effect of these factors could easily outweigh any tariff relief and undermine business sustainability,” the statement said further.
“It is simply not a commercially viable solution for most Malaysian manufacturers.”
The group stressed that relocating production is a complex, long-term investment that requires careful evaluation of supply chain readiness, customer proximity, access to skilled labour, and long-term cost stability.
Instead, MICCI urged the government to strengthen Malaysia’s trade position through diplomatic engagement with the US.
It also called for greater support for local manufacturers via incentives for digitalisation, automation and export market diversification.
On July 7, the US announced a 25% tariff on Malaysian goods effective Aug 1. In a letter to Prime Minister Anwar Ibrahim, Trump said the tariff was necessary to address the “unsustainable” US trade deficit with Malaysia, which he described as a threat to the US economy and its national security.
Pointing out that no tariffs would be imposed if Malaysian companies chose to manufacture in the US, Trump promised to fast-track approvals to facilitate relocation to US shores.
However, the Small and Medium Enterprises Association of Malaysia (Samenta) urged policymakers and businesspeople not to place too much emphasis on Trump’s suggestion, adding that national policy should not be dictated by foreign political cycles.
Samenta chairman William Ng told FMT that Malaysian businesses should instead focus on building resilience, scalability, and long-term competitiveness, rather than reacting to “policy short-termism”.
He acknowledged that co-investments and strategic partnerships with US entities may make sense for selected large firms and high-margin producers.
Such businesses should receive government backing on a case-by-case basis, he said, especially if they result in job creation or technology transfers that benefit Malaysia.
“But I can’t think of many Malaysian brands or products that would thrive under such arrangements. This highlights the urgent need for us to innovate and move beyond being mere assemblers,” he said.
“For the vast majority of Malaysian manufacturers, especially SMEs, relocation is not a viable option. Costs for raw materials, labour, compliance and land are far higher in the US.
William Ng
“Even with the 25% tariff, Malaysia still holds a significant cost advantage. At most, we might consider shifting operations to countries with lower tariffs, but only if we believe these reciprocal tariffs will persist beyond the current US administration.”
Ng called for Malaysia to speed up trade diversification efforts, especially through under-utilised free trade agreements, like the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
He said the current tensions should serve as a wake-up call for Malaysia to reduce reliance on a single export market and to strengthen its domestic manufacturing base.
“The heavy-handed way in which the tariffs are being imposed sends a worrying signal to exporters—especially our SMEs and mid-tier firms that depend heavily on the US market—that it’s time to diversify, and quickly,” said Ng.
“Even with the 25% tariff, Malaysia still holds a significant cost advantage. At most, we might consider shifting operations to countries with lower tariffs, but only if we believe these reciprocal tariffs will persist beyond the current US administration.”
Ng called for Malaysia to speed up trade diversification efforts, especially through under-utilised free trade agreements, like the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
He said the current tensions should serve as a wake-up call for Malaysia to reduce reliance on a single export market and to strengthen its domestic manufacturing base.
“The heavy-handed way in which the tariffs are being imposed sends a worrying signal to exporters—especially our SMEs and mid-tier firms that depend heavily on the US market—that it’s time to diversify, and quickly,” said Ng.
Just suck up to the CCP ..all will be fine.
ReplyDeleteu would be surprised mfer.
DeleteJust make sure u keep way out of those jalan!
A lot of people don't realise , amidst all the chatter about American decline...
ReplyDeletea) USA is the world's 2nd largest manufacturing country, behind only China.
b) American factories are among the most productive in the world....output per man-hours worked..definitely significantly more productive than Malaysia or China factories.
In many cases, the cost advantage of a China or Malaysia factory is no more than 10-20 %.
So , yes, a 20% tariff can definitely bring some ( not all) manufacturing back to USA.
According to the United Nations Industrial Development Organization (UNIDO), China is the manufacturer with the highest output worldwide in 2023, producing 28.7% of the total global manufacturing output, followed by the United States of America, Germany, Japan, and India.
DeleteIn 2023, the manufacturing industry in the United States accounted for 10.70% ($2.5 trillion) of the total national manufacturing output, employing 8.41% of the workforce. In 2023, Germany's manufacturing output reached $844.93 billion. The sector employed approximately 20.8% of the workforce.
UNIDO also publishes a Competitive Industrial Performance (CIP) Index, which measures the competitive manufacturing ability of different nations. The CIP Index combines a nation's gross manufacturing output with other factors like high-tech capability and the nation's impact on the world economy.
From the US & Germany matrices, one can seduces that US manufacturing output is mainly high valued items like commercial airplane & pharmaceutical products. Minus these high valued items, US would be way behind Germany.
In 2022, Norway, Ireland, and Denmark were consistently ranked as the most productive countries based on GDP per hour worked. While some sources highlight Central and South American countries for high employee productivity rates, OECD data, which focuses on GDP per hour, places these countries lower in the rankings.
Thus a national productivity rate is an numeric acrobat, depending heavily on the base economic matrices used.
Productivity is therefore also affected by the tools available to workers. Those with more sophisticated tools tend to boast higher levels of productivity etc etc…
To have a strong manufacturing base is a multidisciplinary consideration. Depending on the kinds of manufacturing goods, availability of supply chains completeness & dedicated skilled workforce, success & failure is complicated.
Glaring example is TSMC's failure in setting up a high tech chip manufacturing plant in Arizona USA.
Equally no medium cost manufacturing goods can be successfully implemented in the US due to the fact of high hourly wages, local lackadaisical working attitude in production lines.
US wouldn't be able to do anything with full manufacturing capability bcoz of the dominant of the financial services.