Malaysia’s Medical Industry Braces for Impact Amid US Tariff Threats

Malaysia’s medical device and pharmaceutical sectors are on edge as the United States, under President Donald Trump, mulls imposing tariffs on pharmaceutical imports valued at a staggering US$200 billion. The announcement of a 24% reciprocal tariff on Malaysian goods earlier this month has already triggered immediate reactions, with some US-based importers canceling orders in what industry leaders describe as a knee-jerk response. With exports to the US constituting a significant portion of Malaysia’s medical trade, the potential fallout could reshape the industry’s future.

Significant Exposure to the US Market

Malaysia’s medical device exports to the United States were valued at RM13.69 billion (US$3.07 billion) in 2024, accounting for nearly 37% of the country’s total medical device exports of RM37.03 billion, according to data from the Health Ministry. Pharmaceutical exports, while smaller, still amounted to RM560 million, representing over 18% of Malaysia’s total pharmaceutical exports of RM3.03 billion. Key products include medical-grade gloves, catheters, and syringes—items critical to the US healthcare system.

Johari Abu Kasim, president of the Malaysian Medical Device Manufacturers Association (Perantim), highlighted the immediate impact of the tariff announcement. “The effects were felt as soon as the tariffs were proposed” he said. “Some US importers canceled orders almost overnight.” He also noted that indirect exports through Singapore make up 23% to 25% of the total trade with the US, adding another layer of complexity to the unfolding situation.

Industry Jitters Amid Uncertainty

The threat of tariffs has left Malaysian exporters anxious, with the situation described as fluid and unpredictable. Johari acknowledged the nervousness among industry players, with many unsure how the tariffs—if implemented—will alter long-standing trade relationships. However, he pointed to a potential silver lining: a proposed 145% tariff on Chinese medical products could position Malaysian goods as more competitively priced in the US market, potentially offsetting some losses.

Ching Choon Siong, executive director of the Association of Malaysian Medical Industries (AMMI), echoed these concerns, warning that the tariffs could erode price competitiveness and reduce export volumes. “Our members anticipate global price increases as a ripple effect, which will inevitably raise the cost of goods sold” he said. While immediate demand for Malaysian medical devices in the US remains stable, Ching emphasized that the long-term impact of these tariffs, or any retaliatory measures, is still under assessment.

Strategic Responses and Market Diversification

In response to the looming tariffs, Malaysian manufacturers are exploring multiple strategies to mitigate risks. Johari revealed that some Perantim members are considering establishing satellite production plants in the United States to serve the domestic market directly, bypassing import duties. “This could be a viable long-term solution for some of our larger exporters” he said. Additionally, manufacturers are actively seeking new markets to reduce reliance on the US.

Collaborating with the Malaysia External Trade Development Corporation (Matrade), the industry is targeting non-traditional markets for expansion. Johari also highlighted the potential for boosting intra-Asean trade, especially with Malaysia currently chairing the regional bloc. “This is an opportunity to leverage Asean’s collective strength and deepen trade ties within the region” he said. Such efforts could provide a buffer against disruptions in the US market, though transitioning to new markets will require time and investment.

Pharmaceutical Sector on Alert

While the medical device sector bears the brunt of the tariff threat, Malaysia’s pharmaceutical industry is not immune to potential downstream effects. Zulkifli Jafar, managing director of Pharmaniaga Bhd, a leading pharmaceutical company, clarified that his firm does not currently export directly to the United States. “As such, the tariffs have no immediate impact on our operations” he said. However, he cautioned that the interconnected nature of global trade means policy shifts in one region can reverberate worldwide.

Zulkifli stressed that Pharmaniaga is closely monitoring the situation and engaging with local and international suppliers to assess risks. “We are developing contingency plans to ensure flexibility and swift adaptation if conditions change” he said. The company remains committed to maintaining supply chain resilience and uninterrupted service to its customers, even as the global trade landscape evolves.

Historical Context and Shifting Policies

During Trump’s first term, medical devices and protective gear from certain countries, including China, Mexico, and Canada, were exempted from duties. However, recent reports suggest that such exemptions may not be extended this time, signaling a tougher stance on imports. For Malaysia, which was not previously a primary target of US trade policies in this sector, the proposed tariffs mark a significant shift that could alter its position in the global medical supply chain.

The disparity in tariff rates—24% for Malaysia compared to 145% for China—offers a comparative advantage, but it is not enough to fully alleviate concerns. Malaysian manufacturers worry that sustained tariffs could erode profit margins, especially for smaller firms less equipped to absorb cost increases or pivot to new markets. The uncertainty surrounding the finalization of these tariffs adds another layer of difficulty to strategic planning.

Broader Implications for Malaysia’s Economy

Malaysia’s medical device and pharmaceutical industries are critical components of its export-driven economy, and any disruption in trade with the US could have wider repercussions. The sectors employ thousands of workers and contribute significantly to national GDP. A prolonged trade dispute or the imposition of tariffs could lead to job losses, reduced investment, and slower growth in these high-value industries.

Analysts also warn that global price increases, as predicted by AMMI, could affect healthcare costs worldwide, including in Malaysia. If exporters pass on higher costs to consumers, the affordability of essential medical products could be compromised, particularly in developing markets. This raises questions about the balance between protecting domestic industries through tariffs and ensuring access to affordable healthcare globally.

Looking Ahead: Challenges and Opportunities

As Malaysia navigates this uncertain terrain, the government and industry stakeholders face the dual challenge of safeguarding economic interests while adapting to a shifting global trade environment. The push for market diversification and intra-Asean trade offers a promising path forward, but success will depend on coordinated efforts and sustained policy support.

For now, the medical industry remains in a state of cautious watchfulness, with manufacturers and exporters preparing for various scenarios. Whether the proposed tariffs materialize or negotiations lead to a reprieve, the episode underscores the vulnerability of export-dependent economies to geopolitical shifts. As Johari aptly noted, “The situation is fluid, and we must be ready for anything.”

With Malaysia’s role as a key supplier of medical products to the US hanging in the balance, the coming months will be critical in determining how the industry weathers this storm—and whether it can emerge stronger through innovation and adaptability.