New U.S. tariffs: a legal and strategic guide for Malaysian exporters

Earlier this week, the United States announced sweeping new tariffs that represent a major shift in global trade dynamics. These measures, combined with increasingly aggressive enforcement of sanctions, have significant implications not only for direct Malaysian exporters to the U.S., but also for companies in seemingly unrelated regions – including Malaysian businesses that rely on complex supply chains or sell to third-country buyers.

This article explores:

• what Malaysian companies need to know on the latest tariffs and sanctions from a legal perspective;
• what practical steps Malaysian companies should take; and
• how legal strategy can play a crucial role in navigating the new trade environment.

A new era of trade disruption

On 2^nd April 2025, via Executive Order, the U.S. government imposed a universal 10% tariff on almost all imports into the country. In addition, it introduced a new “reciprocal tariff” system that imposes significantly higher duties on selected countries based on perceived trade imbalances. [1]

Malaysia is among the countries directly affected, with Malaysian exports to the U.S. now subject to a 24% tariff. Other countries facing similar or higher rates include China (54%), the European Union (20%), Vietnam, India, and Japan (all exceeding 20%).[2]

In the ASEAN region, Malaysia fares relatively well, with only Singapore and the Philippines having been slapped with lower tariffs:

Singapore:[3] 10%

Philippines: 17%

Brunei: 24%

Malaysia: 24%

Indonesia: 32%

Thailand: 36%

Myanmar: 44%

Vietnam: 46%

Laos: 48%

Cambodia: 49%

However, in spite of other countries facing much higher tariffs, for Malaysian companies, this development is a direct commercial threat that affects pricing, contract performance and long-term market access. There are also significant legal implications which Malaysian companies should take into account.

What changed – and why it matters for Malaysia

Tariffs are an immediate threat

The newly announced tariffs mark a stark escalation of U.S. trade protectionism. By targeting imports broadly, rather than focusing only on strategic competitors or specific sectors, the U.S. has created a scenario where every international supplier is effectively competing against an artificial domestic advantage.

Malaysian companies may find that their exports are now:

• less competitive in price due to tariff-related cost increases
• subject to renegotiation or even cancellation by U.S. buyers
• disqualified from tender opportunities due to origin labelling or cost volatility
• at risk of non-compliance with tariff or customs requirements imposed by U.S. authorities

Importantly for all Malaysian companies, even if you do not sell directly to the U.S., your products may still end up there – and that creates exposure.

Many Malaysian exporters operate as contract manufacturers or component suppliers to companies that eventually sell into the U.S. market. In such cases, you may be asked to justify your product’s origin, bear part of the tariff cost, or renegotiate existing contracts on unfavourable terms.

Sanctions are an additional threat

However, these tariffs are only one piece of a more complex puzzle. Alongside tariffs, the U.S. government has intensified its enforcement of economic sanctions, extending them to cover not only direct transactions with sanctioned countries (such as Russia, Iran, and certain entities in China) but also secondary sanctions that target entities indirectly connected to those sanctioned countries.

For Malaysian companies, this dual challenge is critical. Even businesses that do not export directly to the U.S. or sanctioned countries could inadvertently find themselves caught in regulatory crossfire. If your products end up incorporated into goods eventually exported to the U.S., or if your business transactions involve sanctioned countries even indirectly, you could face disruptions, penalties, or substantial contractual issues.

This makes the new U.S. measures not just a distant trade problem, but a direct compliance and operational risk affecting Malaysian exporters, contract manufacturers, and supply-chain participants across numerous industries – especially high-tech sectors like semiconductors. We highlighted this specific risk in an earlier write-up on 4^th March 2025.[4]

Case study: A Malaysian semiconductor supplier in the crosshairs

To illustrate this dynamic, consider a Malaysian semiconductor manufacturer supplying high-quality components to a European technology company. Initially, this Malaysian firm could believe that it is safe from the direct impacts of U.S. tariffs and sanctions, since its transactions appear entirely EU-focused.

However, complications may quickly arise. Assume that the European buyer incorporates Malaysian-made semiconductors into electronic devices and components which are then sold into the U.S. market. Now, because the EU-manufactured products contain Malaysian-origin components, the final goods entering the U.S. attract the new reciprocal tariff – imposing an unexpected additional cost burden of at least 20%.[5]

Needless to say, this 20% tariff undermines the price competitiveness of the European buyer and very likely forces it to renegotiate prices with the Malaysian supplier. If the Malaysian supplier cannot accommodate the request for new prices, it will likely switch to alternative suppliers. In the worst case, the European buyer may even orders.

At the same time, if even a single component sourced by the Malaysian semiconductor firm originates from an entity sanctioned by the U.S. – such as certain Chinese suppliers on U.S. export control or sanctions lists – the risk escalates significantly. The European buyer, facing secondary sanctions from the U.S., may require extensive and costly compliance checks, detailed contractual warranties, or even terminate the relationship with the Malaysian supplier altogether to avoid potential exposure to U.S. enforcement actions.

Generally, the costs related to coming into the crosshair of U.S. authorities for violating sanctions can be enormous, as recently highlighted by our Harald Sippel in an interview for Free Malaysia Today.

Thus, what initially appeared as distant trade regulations rapidly becomes an immediate crisis for the Malaysian supplier, potentially impacting revenue streams, reputation, and long-term commercial relationships.

Legal and Commercial Exposure for Malaysian Companies

The legal consequences of this shifting landscape are real and urgent. Malaysian companies may face:

Contractual risk

Many international trade contracts contain clauses that allocate the risk of tariffs or other regulatory changes. If these clauses are outdated or ambiguous, disputes may arise. For example, a buyer of Malaysian products may claim that tariffs fall under “force majeure” or “change of law” and suspend the contract – offering the continue purchasing only if the Malaysian exporter absorbs all the tariffs.

Pricing and margin pressure

When tariffs suddenly increase the cost of your goods in a target market, buyers may demand discounts, trigger price renegotiation clauses, or seek alternative suppliers. Without legally sound pricing structures and adjustment mechanisms in place, your margins may erode quickly.

Potentially, new tariffs could lead to situations which amount to a “change in circumstance” or “hardship” – a concept that doesn’t exist in Malaysia as a matter of statutory law, but that may well exist as a creature of contract.

Compliance and documentation gaps

Under the new tariff regime, customs authorities and business partners alike are paying closer attention to country-of-origin documentation, supplier declarations, and regulatory compliance. Any misstep – even an unintentional one – can lead to shipment delays, penalties, or blacklisting.

Reputational risk

Companies caught up in sanctions-related investigations or accused of circumventing tariffs (e.g. through relabelling or transhipment) may suffer long-term reputational damage, even if they are later cleared of wrongdoing.

Five Steps Malaysian Businesses Should Take Now

To navigate this complex and fast-evolving environment, Malaysian businesses – especially exporters and manufacturers – must take proactive steps. Here are five immediate measures to consider:

Step 1: Review existing contracts for tariff and risk allocation clauses

Start by identifying which contracts may be affected by U.S. tariffs. Examine the provisions that deal with price adjustments, delivery obligations, force majeure/change of law and change of circumstances/hardship. Consider renegotiating unclear clauses to ensure that tariff risks are shared fairly.

Step 2: Map direct and indirect exposure to the U.S. market

Don’t assume that your company is immune just because your buyer is based in Europe, the Middle East, or Southeast Asia. Ask yourself: Could my goods ultimately end up in the U.S.? If the answer is yes, prepare for questions from your buyers and possibly additional documentation requirements.

Planning for such questions well in advance may allow you to avoid delays and contract suspensions.

Step 3: Reassess origin documentation and labelling practices

Rules of origin have become a focal point of customs scrutiny. Ensure your declarations are accurate, well-documented and consistent with U.S. and WTO requirements. Misstatements – whether intentional or not – can expose you to penalties or allegations of fraud. In a time of escalation, this is more crucial than ever.

Step 4: Prepare for demands for contract renegotiations

If buyers impacted by U.S. tariffs do not claim force majeure/change of law, they will very likely approach you with requests to change prices, delivery terms, or representations.

Prepare now by understanding your legal rights under your existing contracts and developing a negotiation strategy. This is particularly critical if your contracts include clauses that are unclear about cost sharing in response to regulatory changes.

Step 5 Conduct a sanctions exposure review (if applicable)

While sanctions are not the primary issue for most Malaysian companies, they are relevant for businesses with complex supply chains, USD-denominated transactions, or links to Russia, Iran, or certain Chinese entities. A quick exposure review can uncover hidden risks and help you decide whether targeted compliance measures are needed.

We provided an overview of critical steps you should take in an earlier write-up.[6]

How legal strategy can help you stay ahead

In times of uncertainty, legal advice is not just about avoiding liability – it’s about making informed commercial decisions that protect your business and preserve long-term value.

At Aqran Vijandran, we regularly assist Malaysian and foreign companies in navigating cross-border risks, including:

• reviewing and redrafting commercial contracts to account for tariffs and sanctions;
• assessing force majeure, change of law, hardship and change of circumstances clauses and providing according legal advice;
• conducting legal risk assessments for U.S.-linked transactions;
• supporting negotiations with international customers or suppliers affected by tariffs; and
• coordinating with U.S. or EU legal counsel where necessary.

Our approach is pragmatic, business-oriented, and tailored to your specific industry and risk profile.

Conclusion: trade risk is now a boardroom issue

The April 2025 U.S. tariff measures mark a watershed moment for global trade – and a wake-up call for exporters everywhere. For Malaysian companies, the key message is clear: even if you are not the intended target, you may still be caught in the blast radius.

This is the time to act – not react. Companies that take proactive steps to understand their exposure, update their contracts, and seek legal clarity will be better positioned to weather the storm and emerge stronger.

If your business is exposed to U.S. tariffs or navigating uncertain cross-border risks, we invite you to contact our team for a confidential consultation.

📩 Talk to us about a tariff risk review or trade compliance audit: info@aqranvijandran.com

[1]              To clarify, President Trump issued several executive orders related to trade. The most relevant one for reciprocal tariffs is Executive Order of 2^nd April 2025 Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits, available at: https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits (last accessed on 2025-04-04).

[2]              For details, see Annex I to the above-mentioned Executive Order, which is available at www.whitehouse.gov/wp-content/uploads/2025/04/Annex-I.pdf (last accessed on 2025-04-04).

[3]              For details, see the above-mentioned Annex I. To clarify, Singapore is not listed in Annex I; however, a baseline tariff of 10% applies, as can be inferred from White House communications.

[4]              Harald Sippel and Raja Nadhil Aqran, The Nvidia Chip Scandal: Export Control Risks for Malaysia, 4^th March 2025, available at www.aqranvijandran.com/blog/the-nvidia-chip-scandal-export-control-risks-for-malaysia (last accessed on 2025-04-04).

[5]               To clarify, the reciprocal tariff imposed on the EU is 20% a – see the Annex in footnote 2 above.

[6]              Harald Sippel and Raja Nadhil Aqran, The Nvidia Chip Scandal: Export Control Risks for Malaysia, 4^th March 2025, available at www.aqranvijandran.com/blog/the-nvidia-chip-scandal-export-control-risks-for-malaysia (last accessed on 2025-04-04).

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