KUALA LUMPUR (April 14): Malaysia should leverage its importance in electronics, semiconductors, rare earths, healthcare and security to negotiate tariff relief from the US during the 90-day reprieve, according to Kenanga Research.

In a note on Monday, it said Malaysia should leverage its position as a crucial supplier of electronics and semiconductors to the US to secure tariff exemptions.

Malaysia makes up 20% of US chip imports. Semiconductors are vital for various US industries, especially automotive and technology. As the US looks to strengthen its supply chains, Malaysia’s role in chip production gives it a strong bargaining position to secure tariff exemptions. Malaysia’s electronics made up 39.9% of its exports in 2024 and play a key role in US tech supply chains. As a stable alternative to China, Malaysia offers “friend-shoring” opportunities.

Hosting more US electronics production would strengthen supply chain resilience and support tariff removal. Like South Korea’s steel deal, Malaysia could seek tariff exemptions through semiconductor partnerships.

In terms of rare earth elements, Malaysia has a strategic edge as host to the world’s largest rare earth processing plant outside China (Lynas in Kuantan).

With the US relying heavily on China for rare earths (78% of imports), Malaysia can offer a secure alternative for critical sectors like electric vehicles, defence, and technology. By guaranteeing supply and forming partnerships, Malaysia can use this leverage to push for tariff cuts — positioning it as a win-win for US supply chain security and trade normalisation.

In terms of rubber gloves, Malaysia is the world’s top producer and is crucial for global healthcare.

Malaysia can offer preferential market access for the US healthcare industry.

New US tariffs on Chinese medical imports, including gloves, could boost demand for Malaysian gloves. As the world’s top glove producer (45% global share in 2024), Malaysia can use this advantage to negotiate better trade terms and seek tariff relief.

The US being the largest glove importer — US$6.0 billion (RM26.53 billion) in 2023 — strengthens Malaysia’s bargaining position.

Kenanga also said that by strengthening security ties and aligning with US priorities, Malaysia can encourage tariff relief. At the same time, it must maintain a neutral foreign policy and engage all major partners, including China. This balanced approach boosts Malaysia’s credibility as a trusted regional player and helps ease trade tensions.

“Using these leverage points through quiet diplomacy, targeted concessions, and supply chain partnerships, Malaysia can effectively negotiate tariff rollback. There is a high possibility that the US will reciprocate if it perceives tangible benefits such as reshoring support, reduced reliance on China, and security cooperation,” Kenanga said in its note.

It added that Malaysia should adopt a unified negotiating strategy to secure US tariff reductions. Key tactics include:

Bilateral diplomacy with data: Present detailed evidence showing how US industries — like automotive, defence and consumer goods — would benefit from tariff removal.

Concession packages: Offer a bundle of concessions, such as capping steel exports or increasing US imports to balance trade.

Precedents: Highlight past instances where the US revised tariffs, such as the South Korea steel deal or the US-EU agreement on steel and aluminium.

Asean leverage: Remind the US that continued tariff pressure could push Malaysia and its Asean neighbours closer to China, which could shift regional dynamics.

“Malaysia can’t afford to wait and hope the tariffs go away. If Trump 2.0 is back, it needs to be first in line, not last on the list. That means bold, strategic, and business-savvy diplomacy — with the right mix of pressure, partners, and pragmatic deal-making,” it said in the note.