Malaysia Should Continue Diplomatic Engagement Amid US Section 301 Probe -- Economist

By Abdul Hamid A Rahman

KUALA LUMPUR, March 12 (Bernama) -- Malaysia should continue its diplomatic engagement while demonstrating transparency in its manufacturing and supply chains, and strengthening trade diversification, an economist said.

This follows the United States’ (US) decision to initiate Section 301 investigations into structural excess manufacturing capacity in several economies, including Malaysia.

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IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said the probe is a procedural step typically required before the US imposes trade measures.

“Section 301 probes are typically a procedural step the US must take before imposing trade measures, particularly after the Supreme Court invalidated the earlier emergency tariffs.

“This means the investigation itself does not automatically translate into tariffs but allows Washington to assess whether certain manufacturing policies or production levels burden US commerce,” he told Bernama.

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Mohd Sedek said Malaysia’s exposure to the probe remains moderate as the investigation focuses on manufacturing sectors that are key components of the country’s exports to the US.

“These include electronics, semiconductors and machinery, which are closely linked to Malaysia’s manufacturing base. However, the bigger risk is closer scrutiny of supply chains rather than broad tariffs on Malaysian exports,” he said.

He added that the investigation could accelerate supply chain restructuring, particularly across Asia and ASEAN.

“When the US begins investigating issues such as excess capacity and manufacturing practices, many companies will rethink where they place their production.

“This could lead to greater diversification of supply chains within ASEAN rather than concentrating them in only a few countries,” he said.

Mohd Sedek said the development could present both risks and opportunities for Malaysia as multinational companies reassess their regional production strategies.

“There could be greater scrutiny on sectors such as electronics, but at the same time it is also an opportunity if multinational companies continue shifting or diversifying production to stable hubs such as Malaysia.

“Compared with some countries in ASEAN, Malaysia is often viewed as a relatively stable and neutral manufacturing base for regional production,” he said.

He said sectors that could face the greatest vulnerability if trade measures are eventually imposed include electronics and electrical, semiconductors, machinery and intermediate manufacturing.

“These industries form key components of Malaysia’s exports to the United States.

“Any potential impact would likely be sector-specific rather than broad-based, mainly affecting supply chains connected to these industrial segments,” he said.

Mohd Sedek added that ASEAN cooperation would also be important given that many manufacturing supply chains operate across multiple countries in the region.

“Better coordination on rules of origin and supply chain transparency can help address US concerns while keeping ASEAN an attractive and trusted manufacturing base,” he said.

-- BERNAMA