What's Happening?
Malaysia and the U.S. have reached a trade agreement that includes a reduced tariff of 19% on certain goods, impacting the semiconductor and agriculture sectors. Malaysia has committed $150 billion in U.S. semiconductor and data center investments, while the U.S. has agreed to zero-rated tariffs on semiconductor exports. However, Section 232 investigations could impose additional levies on advanced AI chips. The agriculture sector faces potential disruptions due to a 19% tariff, with major companies like IOI Corporation pivoting towards sustainability to mitigate risks.
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Why It's Important?
The trade agreement reshapes the investment landscape for the iShares MSCI Malaysia ETF (EWM), which allocates significant portions to electronics and agriculture. The semiconductor sector's exposure to potential tariffs could affect companies like Unisem Berhad, while the agriculture sector's sustainability initiatives aim to offset trade-related headwinds. The reduced tariff offers short-term relief, but ongoing geopolitical tensions and tariff reviews could impact Malaysia's economic resilience and investor sentiment.
What's Next?
Investors are advised to monitor the outcome of U.S. Section 232 reviews, which could stabilize or disrupt the semiconductor sector. The August 1, 2025, tariff deadline is a critical inflection point, with potential implications for Malaysia's role as a manufacturing hub. EWM investors may consider sector diversification and timing strategies to navigate trade turbulence and geopolitical uncertainties.
