Malaysia has urged Chinese companies to avoid using the country as a base to "rebadge" their products to bypass US tariffs, as the trade tensions between the US and China continue to escalate. The warning was issued by Malaysia's Deputy Trade Minister, Liew Chin Tong, on Monday (Dec 2) amid growing concerns over the ongoing trade war and increasing export restrictions.
Sources have indicated that the US is likely to impose further restrictions on exports to Chinese semiconductor toolmakers, including products manufactured in countries like Malaysia, Singapore, and Taiwan. Malaysia plays a significant role in the global semiconductor industry, contributing 13 percent of global testing and packaging services. The country is well-positioned to attract more business as Chinese chip manufacturers seek to diversify their operations overseas.
"I have been advising many businesses from China over the past year not to invest in Malaysia if their plan is solely to rebrand their products to avoid US tariffs," said Liew Chin Tong during a forum on Monday. He did not specify the types of businesses involved in this practice.
Liew emphasized that the US would continue to impose tariffs regardless of which political party is in power, citing the example of the solar panel sector. Last year, the US imposed tariffs on solar exports from countries like Vietnam, Thailand, Malaysia, and Cambodia, where Chinese-owned factories are located. These tariffs were expanded in October following complaints from US manufacturers.
Meanwhile, in other parts of Asia, Japan's manufacturing sector has shown the fastest decline in activity in eight months, as factories cut back on production due to weakening demand. However, this was partially offset by an increase in corporate spending on plant and equipment, according to official data for the third quarter.
In India, factory activity growth slowed slightly due to ongoing price pressures, with official data revealing that the country’s economy expanded at a weaker-than-expected pace during the July-September period, impacted by slow growth in manufacturing and consumption.
Southeast Asia's factory activity also showed mixed results. While there was a decline in factory activity in Indonesia and Malaysia, Thailand and Vietnam showed slower growth.
Over the past two years, Chinese companies have been establishing factories in Penang and Johor, two prominent manufacturing regions in Malaysia. Penang, known for its semiconductor manufacturing since the 1970s, has a well-established industry, while Johor has also seen increased interest from Chinese firms.
Lee Ting Han, an executive councillor in Johor, recently advised a Chinese medical device company considering relocating their manufacturing to Mexico due to potential tariffs. He reassured the company that, for now, their equipment wouldn’t be subject to tariffs. However, he also warned that future changes in US trade policies could lead to unpredictable shifts.
Meanwhile, Malaysian Prime Minister Anwar Ibrahim has been strengthening the country’s ties with China, its largest trading partner, while continuing to maintain strong relations with the US. Last week, Anwar announced Malaysia's intention to join the BRICS economic bloc (Brazil, Russia, India, China, and South Africa) ahead of an upcoming visit from Chinese Premier Li Qiang.
How Trump Warned BRICS Nations Against Challenging the US Dollar
Gold Prices Edge Up Amid Trade Tariff Concerns, But Dollar Resilience Caps Gains
Trump Plans to Impose 10% Tariffs on China, 25% on Mexico and Canada