Malaysia Cuts Interest Rate Amid US 25% Tariff Imposition

Malaysia faces a reinstated 25% tariff on its exports to the United States starting August 1, 2025, as announced by President Donald Trump, marking a return to his trade policy aimed at addressing the US trade deficit with Malaysia. This tariff is a unilateral decision by the US and not the outcome of bilateral negotiations, and it applies separately from the base 10% tariff already in place, contrary to earlier misunderstandings. Malaysia's central bank responded by cutting its benchmark interest rate to 2.75% in a pre-emptive move to support the economy amid the uncertain global trade environment caused by such tariffs and geopolitical tensions. Prime Minister Anwar Ibrahim plans to appeal for tariff reductions during upcoming talks with US officials, while domestic political challenges add complexity to Malaysia’s economic landscape. Trade officials emphasize continued negotiations with the US and reaffirm commitment to multilateralism and the WTO framework, even as industry players brace for supply chain disruptions. Trump’s tariff policy also includes exemptions for certain sectors, like semiconductors, and offers incentives for Malaysian companies to manufacture within the United States to avoid tariffs.