Malaysia's semiconductor exports to the U.S. remain exempt from tariffs, ministry says

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Semiconductor exports to the U.S. are tariff-free

Highlights

Malaysia's semiconductor exports to the U.S. remain exempt from tariffs following Section 301 negotiations, due to no excess-capacity issues and 10% forced labor compliance.
More than 550 EU companies with annual revenue exceeding RM51 billion operate in Selangor, driving growth in high-value sectors such as advanced manufacturing and the green transition.
The EU highlighted the potential for joint semiconductor investment and the resumption of Malaysia-EU Free Trade Agreement negotiations to deepen bilateral economic ties.

This article was translated from the original. Read the original version by our correspondent here.

Section 301 negotiations and exemption status

As reported by The Edge Malaysia, Johari said Malaysia's negotiations with the U.S. under Section 301 cover four issues: forced labor, excess production capacity, environmental standards and government subsidies. He said Malaysia faces no issues related to environmental standards and state subsidies, while the forced labor issue has been finalized at a 10% rate for Malaysia, compared with 12.5% for other countries, with only 17 economies subject to the 10% rate.

According to him, the only issue yet to be finalized is excess capacity, but Malaysia has no excess capacity in the sector concerned. Johari added that any excess capacity linked to goods exported from Malaysia may originate from a third country, and Putrajaya will seek clarification from the U.S. on the country identified as contributing to the issue.

He said access to overseas markets depends on compliance with the requirements and regulations set by each country. He added that trading partners, including the European Union, also impose strict environmental requirements, and companies must comply with them to maintain access to those markets.

Malaysia-EU trade relations and the importance of supply chains

Johari spoke at EU-Malaysia Business Day 2026: Selangor in Focus in Kuala Lumpur, held in conjunction with the Selangor International Business Summit from Oct 14 to 17, 2026. The third edition of the annual event was organized by the European Union Delegation to Malaysia together with the Selangor state government, Invest Selangor and EUROCHAM Malaysia.

Under the theme “Bridging Innovation-Powering Progress”, the event aims to strengthen business ties and open up more investment opportunities, supported by the strong presence of EU companies in Malaysia. More than 550 EU companies operate in Selangor, generating annual revenue exceeding RM51 billion across high-growth and high-value sectors such as advanced manufacturing, the green transition, digitalization and logistics.

EU Commissioner for International Partnerships Jozef Sikela said joint investment with Malaysia would strengthen and diversify the semiconductor ecosystem, which is becoming increasingly important to both economies. He also said that the resumption of negotiations on the Malaysia-EU Free Trade Agreement would deepen economic ties, while describing Lumut Maritime Industrial City as another potential area for cooperation.

In our previous coverage of the government's strategy under NIMP 2030 and the National Semiconductor Strategy, we explained Malaysia's efforts to reduce exposure to global semiconductor cycle fluctuations by strengthening the E&E value chain and expanding high-value-added activities such as integrated circuit design and advanced packaging. The article also covered measures to diversify export destinations into non-traditional markets and strengthen domestic supply chains to enhance economic resilience.

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