Written by Fazrina Fezili

The Impact of Trump's Tariff on Malaysia's Property Sector

In April 2025, President Donald Trump imposed a 24% tariff on Malaysian imports to the U.S., affecting multiple sectors of Malaysia's economy, including the property market. This article explores how the tariff influences property development, construction costs, and foreign investment in Malaysia.

What's Trump's Tariffs?

The U.S. tariffs target a broad range of imports, with Malaysia facing a 24% levy. This measure disrupts global supply chains, increases the cost of raw materials, and exerts upward pressure on consumer inflation, potentially steering the global economy toward stagflation, a combination of low growth and high inflation. In the worst-case scenario, these tariffs could precipitate a global recession.

How Do Trump's Tariffs Affect Malaysia's Property Sector?

A chart of new tariffs that was displayed by President Donald Trump during his trade announcement April 2, 2025, and posted on social media.
Courtesy: U.S. President Donald Trump via Truth Social

Higher Construction Costs

One of the most immediate effects of the tariff is the potential rise in construction costs. Malaysia exports a variety of construction materials like flooring, fixtures, and certain equipment to the U.S.. Many of these materials are produced in Malaysia and sold to U.S. companies. When the U.S. imposes a tariff, it increases the cost for U.S. businesses importing those materials, and this higher cost eventually trickles down to property developers. These developers might need to increase property prices to make up for the higher material costs.

However, compared to other Southeast Asian countries, Malaysia's tariff rate is relatively lower. For example, Indonesia, Thailand, Vietnam and Cambodia face tariffs as high as 32%, 36%, 46% and 49% respectively. This gives Malaysia a competitive edge, as developers here may have slightly lower costs than those in countries with higher tariff rates.

[Summary] Tariffs raise the cost of doing business between countries by imposing a fee on imported goods. When a country like the U.S. raises tariffs on another country’s goods, it forces businesses to adjust to the increased costs. In the property sector, this typically means higher prices for construction materials, which may lead to more expensive properties for buyers.

Supply Chain Disruptions

Another significant effect of the tariffs is potential supply chain disruption. The U.S. is a major market for many construction materials, and with higher tariffs, U.S. companies may start sourcing materials from countries with lower or no tariffs. As a result, suppliers in Malaysia could experience reduced orders, and this shift in demand could lead to shortages of certain materials in Malaysia, affecting the availability and cost of materials for property developers.

These disruptions could cause project delays and increased material prices, further complicating the property development process. Developers can mitigate these risks by diversifying their supply sources, looking to other markets with more stable trade relations.

[Summary] Supply chains refer to the network of suppliers and manufacturers that deliver the materials or products needed to complete a project. When tariffs are imposed, the flow of goods between countries is disrupted, leading to delays in construction projects as developers may struggle to obtain the necessary materials.

Decreased Foreign Investment

Another concern is that the tariff may reduce foreign investor confidence in Malaysia. Foreign Direct Investment (FDI) plays a significant role in Malaysia’s property market, and the imposition of tariffs could make foreign investors wary, especially those from countries like the U.S., who may find it less profitable or more complicated to invest in Malaysia's property sector.

A drop in foreign investment could slow down new property developments, potentially causing a decrease in property values as demand drops.

[Summary] Foreign investment in real estate is a significant driver for development in many countries, including Malaysia. If foreign investors pull back due to increased costs or uncertainty from tariffs, the overall demand for new properties could drop, which might lead to lower property prices.

Few Questions About Trump's Tariffs

Why did the U.S. impose a 24% tariff on Malaysian goods?

The U.S. government claims that Malaysia’s average tariff rates are higher than those of the U.S. and that this tariff is aimed at balancing trade between the two countries.

The U.S. imposed a 24% tariff on Malaysian goods as part of broader trade measures aimed at addressing unfair trade practices, such as dumping and subsidized exports. In 2020, the U.S. Department of Commerce determined that certain Malaysian companies had been selling goods, particularly rubber gloves, in the U.S. market at unfairly low prices, undercutting domestic producers. This practice, known as "dumping," was seen as harmful to U.S. manufacturers, leading to the tariff imposition.

The tariff was part of the U.S.'s efforts to protect American industries from such trade practices, ensure fair competition, and safeguard jobs. The decision also followed ongoing trade tensions between the U.S. and various countries over concerns related to trade imbalances and intellectual property rights.

Which sectors are most affected by Trump's tariffs?

The tariffs have a widespread impact on several industries, including electronics, machinery, rubber products, furniture, and palm oil. In the property sector, rising construction costs due to higher material prices will be a key issue, as many construction materials used in building properties are exported to the U.S.

Electrical and Electronics (E&E)

Affected by tariffs on consumer electronics and components (excluding semiconductors).
Accounts for about 60% of Malaysia's exports to the U.S.
Key manufacturing hubs include Penang, Selangor, and Johor.

Machinery and Equipment

Includes exports like automatic data processing machines, printing machines, and air conditioning units.
Exports in this category were valued at approximately US$6 billion in 2024.

Medical Instruments

Affected exports include instruments and appliances used in medical, dental, surgical, and veterinary purposes.
Exports were valued at US$3.89 billion in 2024.

Rubber Products

Includes rubber gloves, tubes, and pipes made of vulcanized rubber.
Exports in this category were valued at US$1.6 billion in 2024.

Furniture and Related Products

Includes items such as lamps, lighting fittings, and illuminated signs.
Exports in this category were valued at US$1.55 billion in 2024.

How is Malaysia responding to Trump's tariffs?

Rather than challenging the tariffs through the World Trade Organization (WTO), Malaysia is opting for direct negotiations with the U.S. government. The Malaysian government hopes to resolve the issue quickly to prevent further economic damage.

Diplomatic Engagement

Malaysia is planning a diplomatic mission to the United States to negotiate the proposed tariffs, aiming to resolve the issue through direct dialogue.

Regional Coordination

As the ASEAN Chair, Malaysia is leading efforts to coordinate a collective response among Southeast Asian nations, emphasizing the importance of a unified stance to address the tariffs' impact.

Economic Assessment and Planning

The government has established the National Geo-economic Command Centre (NGCC) to assess the tariffs' potential impact on various sectors and to develop strategies to mitigate adverse effects. Prime Minister's Office of Malaysia.

Rejection of Tariff Basis

Malaysia disputes the U.S. claim that Malaysia imposes a 47% tariff on U.S. imports, labeling the calculation method as fundamentally flawed.

Avoidance of Retaliatory Measures

Opting for diplomacy over confrontation, Malaysia has ruled out implementing retaliatory tariffs, focusing instead on negotiations to protect its economic interests.

Economic Outlook

While acknowledging potential challenges, Prime Minister Anwar Ibrahim assures that Malaysia does not foresee a recession, citing the economy's resilience and robust domestic fundamentals.

The U.S. tariffs present challenges to Malaysia’s property market, particularly through higher construction costs and supply chain disruptions. However, with proactive strategies such as diversifying supply sources, managing costs, and engaging with the government, property developers can adapt to these challenges.

Malaysia’s tariff rate is lower than many of its neighbors, like Indonesia, Thailand, Vietnam and Cambodia, giving the country a potential edge in the property market. By staying adaptable, Malaysia’s property developers can minimize risks and continue to thrive in a changing global landscape.

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