Malaysia's Export Boom to Cool in 2026 Amid US Tariffs

After a historic performance in 2025, Malaysia's export growth is expected to slow significantly in 2026. Economists are flagging several headwinds, including the impact of renewed US tariffs, rising geopolitical risks, and the tapering effects of "front-loading" trade activities.

This cautious forecast follows a record-breaking year. In 2025, Malaysia's exports hit an all-time high of RM1.61 trillion, a 6.5% increase from the previous year. The result was bolstered by a powerful finish in December, when shipments surged 10.4% year-on-year to RM153 billion, easily beating the 2.5% median estimate from a Bloomberg survey.

A Look Back at 2025's Record Numbers

The full-year data for 2025 paints a picture of robust trade activity. Key figures include:

• Total Trade: Exceeded RM3.1 trillion for the first time, growing by 6.3%.

• Exports: Grew by 6.5% to RM1.61 trillion.

• Imports: Rose by 6.2% to RM133.7 billion.

• Trade Surplus: Increased by 9.2% to RM151.8 billion, with December marking the 68th straight month of surplus since May 2020.

Despite these strong results, analysts believe this momentum will be difficult to sustain.

Why Economists Expect a Slowdown

Multiple research firms have tempered their expectations for 2026, pointing to a confluence of external pressures that could dampen demand.

Fading Front-Loading and Softer Demand

A key factor cited by analysts is the anticipated end of aggressive "front-loading," where businesses rushed exports to the US to get ahead of potential tariffs. OCBC Group Research expects this "payback" effect, combined with softer external demand, to slow export growth to just 2.2% in 2026.

Similarly, MBSB Research revised its 2026 export growth forecast down from 6% to 4.5%, citing the fading front-loading effect and a high base from the previous year.

The Impact of US Tariffs and Geopolitics

Renewed tariff threats from the United States and escalating geopolitical tensions are central to the cautious outlook. UOB Global Economics and Markets Research anticipates a "bumpy" trade environment, holding its export growth forecast at a modest 2.5%.

The electrical and electronic (E&E) sector, Malaysia's primary export engine, is under particular scrutiny. MBSB Research noted that a new 25% US tariff on certain semiconductor products could create additional pressure. UOB added that while most local firms don't produce high-end fabrication tools, multinational electronic manufacturing services and advanced equipment makers could be affected if their products are shipped to the US.

CIMB Treasury and Markets Research, while expecting E&E to provide momentum in the first half of 2026, is cautious about the second half due to potential weakness in non-E&E exports and the impact of US tariffs.

Potential Bright Spots and Mitigating Factors

While the outlook is challenging, analysts see several factors that could support Malaysia's trade performance.

• Global Tech Cycle: MBSB Research expects E&E exports to remain resilient, supported by the ongoing global technology upcycle.

• Supply Chain Diversification: UOB noted that recent US tariffs on European countries, while not directly impacting Malaysia, could create a "potential tailwind" as global firms continue to diversify their supply chains.

• Trade Agreements and Market Diversification: The Agreement on Reciprocal Trade (ART) with the US is expected to reduce trade uncertainties and improve market access. The government's continued efforts to diversify its export markets are also seen as a key strategy to mitigate external headwinds.

Broader Economic Implications

The trade slowdown is expected to have wider consequences for Malaysia's economy. OCBC's forecast for slower export and import growth aligns with its projection that headline GDP growth will moderate from 4.9% in 2025 to 3.8% in 2026.

Based on its trade and inflation outlook, CIMB is maintaining its call for an unchanged overnight policy rate (OPR) at 2.75% for the entire year, alongside a 2026 GDP forecast of 4.4%.