In July 2025, trade relations between the United States and Malaysia are at a critical juncture, particularly concerning the technology sector and the burgeoning Artificial Intelligence (AI) landscape.
Current
status
Tariff Negotiations: The US is threatening to impose a 25% tariff on Malaysian goods starting August 1, 2025. Malaysia is negotiating for a lower rate, hoping to align with tariffs imposed on regional peers like Indonesia and Vietnam (who face 19% and 20% tariffs, respectively).
AI Chip Export Controls: The US is reportedly preparing to impose new regulations that could restrict exports of advanced AI chips, like those from Nvidia, to Malaysia and Thailand. This move is aimed at preventing re-exports to China, which faces existing bans on these components. Malaysia, a significant player in semiconductor testing and packaging, has warned that these tariffs could disrupt the global supply chain.
Malaysia's Response: Malaysia is tightening its own rules on the movement of US-made high-performance AI chips, requiring permits to address potential transshipment to China. Malaysia is also prioritizing investments in local AI research and development, enhancing international collaborations beyond the US, and boosting STEM education to become more self-reliant in the long term.
Strategic
Balancing Act: Malaysia is navigating a complex geopolitical landscape,
aiming to work with both the US and China in AI development to access diverse
sources of knowledge and technology. They believe this balanced approach allows
for better negotiation and protection of national interests.
AI outlook amidst trade tensions
Malaysia's Growing AI Market: Despite potential US restrictions, Malaysia's AI market is projected to reach US$966.66 million in 2025, with an anticipated CAGR of 26.24% between 2025 and 2031. The government actively supports AI adoption through initiatives like the Malaysia Digital Economy Blueprint (MyDIGITAL) and the National AI Roadmap, aiming to establish the country as a regional data and AI hub.
Key AI Sector Growth: Growth is seen in areas like:
AI-powered education technology: According to a LinkedIn article, the AI education technology market was valued at USD 3.5 billion in 2024 and is projected to reach USD 20.1 billion by 2033.
AI companion apps: Driven by digital transformation and increased smartphone penetration, Malaysia's AI companion app market was valued at USD 2.5 billion in 2024 and is expected to reach USD 10 billion by 2033.
Industrial AI platforms: The Malaysia Artificial Intelligence Platform Market is forecast to expand at a robust CAGR of 14.2%, reaching an estimated value of USD 190 billion by 2031.
Foreign Investment and Collaboration: International tech companies are investing heavily in Malaysia's semiconductor industry, including Intel and Nvidia, to strengthen their supply chain and production capabilities. The recent US-ASEAN Business Council article notes a major US tech firm's US$236 million investment in Malaysia to build a data center and water treatment facility. Malaysia is also collaborating with other nations, including the UAE and Rwanda, to advance AI adoption and responsible AI governance.
Government Initiatives: The Malaysian government is actively fostering the AI ecosystem through various initiatives, including:
National AI Roadmap 2021-2025: Aligns AI development with national goals.
National AI Innovation Center (NAIO): Co-developed with EY and Petronas, serves as a hub for AI talent development.
AIForMYFuture initiative: Aims to upskill 800,000 Malaysians by 2025.
AI-driven initiatives: Malaysia Digital Economy Corporation (MDEC) has onboarded 140 AI solution providers, generating RM1 billion in revenue.
Challenges and Opportunities: Malaysia's AI sector faces challenges including a digital divide, a skills gap among educators, data privacy concerns, and market fragmentation. However, the country's strategic location, multilingual environment, and supportive government policies offer significant opportunities for investment and growth.
Conclusion
The US-Malaysia trade relationship, particularly concerning AI, is marked by both cooperation and potential friction. While Malaysia is a key trade partner and recipient of US tech investment, the impending tariffs and export controls on AI chips pose challenges to the semiconductor supply chain and Malaysia's AI development plans. Malaysia is responding strategically by diversifying its partnerships, investing in local innovation, and strengthening its position as a regional AI hub. The long-term outlook will depend on the outcome of tariff negotiations and Malaysia's success in navigating the complexities of global AI geopolitics.
US trade
deal with Malaysia ai outlook
Here's a
look at the US-Malaysia trade deal, particularly concerning AI, and the broader
AI outlook:
US-Malaysia
trade relations & AI
· The US and Malaysia are currently
engaged in delicate trade negotiations, with a looming deadline for the US to
impose a 25% tariff on Malaysian goods if a new deal is not reached.
· Malaysia's Prime Minister Anwar Ibrahim
announced on July 31st that President Trump will review the proposed tariff
rate, with an announcement expected on Friday, August 1st.
· Malaysia has been seeking a lower tariff
rate, aiming for 20% to align with other Southeast Asian partners like Vietnam
and Indonesia.
· Semiconductors and certain electronic
products have been exempt from these tariffs, providing some relief to
Malaysia's crucial electronics industry which forms a significant portion of
its exports.
· The US government has been tightening
export controls on advanced AI GPUs to countries like Malaysia, concerned about
the potential for these components to be re-exported to China.
· As a response, Malaysia is reportedly tightening its own rules and potentially revising rules of origin on semiconductors to prevent transshipment and comply with US concerns.
Malaysia's
AI outlook
· Malaysia has ambitious plans to become a
leading AI hub in Southeast Asia, with a projected US$115 billion contribution
to its productive capacity from AI by 2030, according to a VeecoTech article.
· The government has launched initiatives
like the National AI Roadmap 2021-2025 and the National
Guidelines on AI Governance and Ethics (released in September 2024), which
aim to foster responsible and ethical AI development and deployment.
· These guidelines, while currently
non-binding, advocate for core principles like fairness, reliability,
transparency, and accountability in AI systems.
· Key sectors like manufacturing,
healthcare, finance, and agriculture are experiencing significant AI
integration in Malaysia.
· For example, Malaysia has launched
an AI-driven palm oil mill and is exploring the use of AI in
diagnostics for diseases like lung cancer and diabetic retinopathy.
· The country is also focusing
on developing its AI talent pool through programs and initiatives
like Microsoft's "AI for Malaysia's Future".
· However, challenges remain, including a significant shortage of skilled AI professionals, concerns about job displacement due to automation, and the need for more specific and robust regulations, especially concerning automated decision-making and data protection, according to Chambers and Partners.
US AI policy
in the context of trade
· The US has been actively promoting the
export of its AI technologies to allies and partners.
· However, it has also implemented
measures to control the diffusion of advanced AI capabilities, particularly
concerning China, with restrictions on the sale of certain AI chips and cloud
access to US AI services.
· The US AI policy also emphasizes promoting US standards and governance models, and working with international organizations to establish global norms for AI development and deployment.
Overall, the
US-Malaysia trade relationship, particularly concerning AI, is a mix of
opportunities and challenges. While Malaysia is eager to leverage AI for
economic growth and sees US technology as vital, the US is focused on balancing
trade interests with national security concerns, especially those related to
China's access to advanced AI capabilities.
Note: The outcome of the US-Malaysia trade deal regarding tariffs is still pending, according to Reuters.
https://www.google.com/search?q=us+trade+deal+with+malaysia
Malaysia's nominal GDP in 2025 is projected to be around $444.98 billion USD. In 2025, Malaysia's nominal GDP per capita is projected to be $14,170, according to Wikipedia. This is based on an estimated nominal GDP of $484.6 billion and a population of 33.85 million, Trade Surplus is $1.9 billion. Malaysia's leading trade partners in 2025 include China, the United States, and Singapore, with strong trade ties also with other ASEAN nations, Japan and the European Union.
US Trade
Deal
In light of the recent announcement of US tariffs, Malaysia's trade relationship with the US, particularly concerning Artificial Intelligence (AI), reflects a balance between navigating the new trade environment and pursuing its digital economy ambitions. Here's an overview of the key points:
Tariffs and
trade deals
· US Tariff Reduction: The US has
reduced the tariff rate on Malaysian exports from a potential 24% to 19%,
effective August 1, 2025.
· Malaysian Perspective: Malaysia
views this as a "significant achievement" achieved without
compromising on "red line" items during negotiations.
· Key Exemptions: Significantly,
Malaysian semiconductor and pharmaceutical products will remain exempt from
these tariffs, reinforcing Malaysia's role in the global supply chain for these
critical goods.
· Broader Implications: This tariff adjustment is part of a larger picture of renewed global trade tensions and the US administration's shifts in trade policy.
Impact on AI
and technology trade
· AI Chip Export Controls: Malaysia
is implementing new controls on the movement of high-performance AI chips of US
origin, requiring permits for their export, transshipment, or transit, according to the
Digital Watch Observatory.
These measures are aimed at closing regulatory gaps and preventing illicit
trade activities.
· Strategic Trade Act: The new
directives are issued under Malaysia's Strategic Trade Act 2010, which aims to
regulate unlisted items suspected of being used in the proliferation of weapons
of mass destruction.
· US Pressure: This move comes amid
increasing pressure from the US to restrict the flow of advanced AI chips to
China due to national security concerns.
· Malaysia's Position in the AI Supply Chain: Malaysia is a significant player in the global semiconductor supply chain and aims to further enhance its role in areas like advanced packaging and AI-driven chips, according to AInvest.
AI outlook
and future considerations
· Digital Economy Ambitions: Malaysia
is actively pursuing digital transformation through initiatives like the
MyDIGITAL blueprint and MY AI NEXUS, aiming for the digital economy to
contribute 25% of GDP by 2025, with AI being a key driver, according to
AInvest.
· Challenges and Opportunities: While
the new trade controls on AI chips introduce complexities, they also provide an
opportunity for Malaysia to solidify its position as a responsible and
compliant player in the global technology trade.
· Investing in the Malaysian Digital
Sector: Investors may find opportunities in Malaysian firms focused on AI
infrastructure, cloud solutions, IoT applications, and cybersecurity,
especially those diversifying into ASEAN or EU markets, according to AInvest.
· Balancing Act: Malaysia's approach demonstrates a desire to navigate global trade pressures while continuing to foster domestic resilience, digital innovation, and strategic international partnerships, according to AInvest.
In conclusion, Malaysia and the US are navigating a complex trade landscape on August 1, 2025. While the reduction in tariffs is a positive development for Malaysia, the restrictions on AI chip movements highlight the broader geopolitical context of technological advancement. Malaysia's commitment to developing its digital economy, coupled with a focus on compliance and strategic partnerships, will be key to its continued success in this evolving environment.
https://www.google.com/search?q=malaysia+trade+deal+with+us+august+1+2025
Norb Leahy, Dunwoody Ga Tea Party Leader
No comments:
Post a Comment