“Reciprocal Tariffs” announced by US on 2 April 2025 – what businesses can do as a start

5 April 2025 onwards, additional 10% ad valorem duty rate (i.e. on top of existing duties and tax) will apply on all imports into US, introduced under the International Emergency Economic Powers Act (“IEEPA”). From 9 April 2025 onwards, country-specific ad valorem rates will increase from 10% for 60 countries as set out in Annex-I. Rate for Malaysia is 24%.

Below are some steps which Malaysian businesses can take in navigating these evolving times:

1. To Malaysian producers who are exporting to US, please take note that the above IEEPA tariffs do not apply to:

• Goods set out in Annex-II
• Goods subject to tariffs under Section 232 of the Trade Expansion Act 1962, either at present (i.e. steel/aluminum articles and their derivatives, motor vehicles and parts as announced earlier) or to be imposed in the future

Malaysian exporters should take steps to:

• Verify whether products sold for export to US are excluded in Annex-II. (e.g. Electronic integrated circuits: processors and controllers under HTSUS 85419000).
  

2. For products that are NOT found in Annex-II, compare the rates applicable to your foreign competitors in Annex-I.  If foreign competitors enjoy a lower rate compared to Malaysia’s 24% (e.g. 10% applies to Australia), US customers may have a preference to switch their orders away from Malaysia.  If competitors are subject to a rate higher than Malaysia’s 24%, (e.g. 46% applies to Vietnam), potential buyers in US may have preference to place orders with Malaysian producers instead.

3. Pending further developments in this matter, savvy traders may explore one or more long term measures to reduce tariffs payable in US e.g. implementing “First Sale for export” arrangement, “unbundling” of customs value, tariff engineering, supply chain restructuring, origin diversifications, contract renegotiation, etc.  However, these measures require in-house expertise or external professional assistance and may not be straight forward to implement quickly given the uncertainties and evolving situations.

4. For Malaysian businesses that do not export at present, or to Malaysian exporters whose domestic market or markets abroad other than US are equally important, take note that global market dynamics are likely to start shifting soon.  Exporters who are under US buyers’ pressure to reduce price / profit margins or had lost US market volume will naturally seek or expand new markets globally to maintain sales volume.  Therefore, increased competitions in many markets around the globe, including Malaysia, are to be expected.  In the event of any foul plays taking place, Malaysian business should be aware of possible trade remedies such as the Anti-Dumping and Countervailing or Safeguards measures to protect domestic industries from unfair trade practices.

5. If the products are found in Annex-II, then generally the landscape is likely to remain neutral to US buyers, at least in the short term.

Please also click on the above header links for the Annex-I and Annex-II, as well as a copy of the slipsheet prepared by our KPMG US Trade & Customs counterpart summarising the changes.

Evelyn Lee
Partner
evewflee@kpmg.com.my
+603 7721 2399

Crystal Chuah Yoke Chin
Associate Director
ycchuah@kpmg.com.my
+603 7721 2714

Regina Lau
Partner
reglau@kpmg.com.my
+603 7721 2188

Titus Tseu
Executive Director 
titustseu@kpmg.com.my
+603 7721 2822

Ng Fie Lih
Partner 
flng@kpmg.com.my
+603 7721 2514