US trade war threatens demand for Malaysian chips, minister says
Published Sat, Jan 18, 2025 · 11:52 AM
US PRESIDENT-ELECT Donald Trump’s policies risk stunting global growth and weakening demand for Malaysian chips, according to Malaysia’s Investment, Trade and Industry Minister Zafrul Aziz.
Zafrul said his primary worry around Trump’s second term as president was the prospect of global inflation accelerating as the US attempts to “re-shore” production capabilities and isolate China through higher tariffs. He was speaking to Bloomberg on a visit to the UK, just three days before Trump’s inauguration.
While he was not immediately concerned about direct US tariffs on Malaysia, Zafrul said he feared the indirect effects of the president-elect’s threat to impose tariffs of up to 60 per cent on imports from China. That could particularly hit Malaysia’s burgeoning electronic chips market, where investment decisions were already being reconsidered.
“The big concern to me would be the whole demand for chips, especially where advancement in AI is so key in driving growth,” Zafrul said.
“Investments decisions are now being analysed” amid concerns that higher tariffs and the cost of moving business to the US will lift prices and lower demand. That could prompt under-investment, he added, which would then hit future supply and push prices even higher.
The country is seeking to be a vital part of the global chips supply chain, having courted investment from the likes of electronics company AT&S, Nvidia, Ericsson and Bosch. Malaysia’s economic growth missed estimates in the fourth quarter, signalling a challenging road ahead as the trade-reliant nation contends with heightened global risks.
Malaysia has long positioned itself as a neutral haven for investment, with electronics hub Penang state emerging as a major winner during Trump’s first term. More recently, tech giants including Microsoft and Amazon have pledged to invest billions of dollars in the country’s infrastructure amid Malaysia’s booming artificial intelligence (AI) sector and improved political stability.
Prime Minister Anwar Ibrahim is betting on the country’s non-aligned stance and resilient economy to weather it through any geopolitical storm. The country approved 254.7 billion ringgit (S$77.1 billion) in foreign investments for the first nine months of 2024, a 10.7 per cent year-on-year jump.
While Zafrul was worried about an escalation in trade tensions between the US and China, he was optimistic the rest of the world may be spared the blanket tariffs of up to 20 per cent on US imports which Trump promised in the run-up during his election campaign.
“This is where I think common sense will prevail,” Zafrul said. “They will probably use this as a negotiation tool, but not to the extent that it will be detrimental to the growth of their own economy.”
Zafrul said Malaysian companies would always play a role in Chinese supply chains, and it was important for corporates to be able to serve the world’s two largest economies. He added Malaysia would make an effort to be transparent with the US – for example, by showing where high-performance graphics processing units (GPU) imported from the US are used.
The US recently limited exports of GPUs, essential in training AI models, to countries including Malaysia and banned their export to countries including China and Russia. BLOOMBERG
