Yong: Sabah’s economy only minimally affected by Trump tariffs

6 April 2025

KOTA KINABALU: Sabah’s direct exports to the US are so minimal that the tariffs of 24% on Malaysian exports to America hardly affect Sabah’s international trade.

Sabah’s main exports consist of oil and gas, palm oil and palm products, wood products, seafood, silica sand and food products most of which go to North-East Asian countries (China, Japan, Korea) and India, Europe and ASEAN countries and Peninsula Malaysia.

In a statement by Datuk Yong Teck Lee President, SAPP and former Chief Minister, he said the estimated direct export of goods to the US for this year (2025) is estimated to be around 1% of Sabah’s total exports (that is, only about RM1 billion of Sabah’s RM100 billion) exports go to the US.

Sabah’s exports to the US consist mainly of oil and gas, wood products, and palm oil. It was only recently that Sabah began exporting an increasing amount of copper foil to the US.

"As it so happened, the good news for Sabah is that the copper (and some wood products) are two of the few items that are exempted from the new tariffs (called reciprocal tariffs)," he said.

Hence, Sabah’s exports of copper foil and some wood products are not affected by the so-called Trump tariffs, he said.

"As for the tariffs on palm oil, the amount of palm oil exported to the US is only a tiny portion of Sabah’s total export of palm oil and palm products (total estimated at RM20 billion for year 2025)."

" Most of Sabah’s palm oil and palm products are exported to China, India, Europe (especially Holland). It follows, therefore, that it is not an insurmountable task for Sabah’s palm oil exporters to divert their palm oil away from the US market to other major buyers (importers) of our palm oil."

According to him, what Sabah’s oil palm sector also needs to do is to have a stable price of fertilisers, reliable labour in oil palm plantations, and improvements to local infrastructure and logistics in order to increase the productivity of the palm oil industry.

"However, if the global trade war caused by the Trump tariffs seriously slow down the economies of Peninsula Malaysia, ASEAN countries, China, Japan, India and Europe (Sabah’s main trading partners), then it is obvious that Sabah’s economy will consequently be impacted because of the reduced purchasing power of the buyers (importers) of Sabah’s exports. "

The possibility of Sabah government losing revenues caused by the a drop in global oil prices can be compensated by Petronas increasing production in line with what OPEC+ (Organisation of Petroleum Exporting Countries Plus) has done two days ago (increasing their production by 411,000 barrels per day), according to him

In any case, OPEC has noted that the world demand for oil and gas remains stable with strong fundamentals.

"As a matter of concern in Peninsula Malaysia, it is the economies of Penang and Selangor that are likely to be impacted by the new US tariffs because these two states host huge American and other foreign investments on high-tech industries, some of which might decide to relocate back to the US."

" The relocation of industrial production to the US is a key objective of the Trump tariffs in order to bring back to the US the manufacturing and industrial productive capacity that the US has lost to other countries over the last thirty years of globalisation. "

Being part of the wider RCEP (Regional Comprehensive Economic Partnership (RCEP), which is the world's biggest trading bloc that encompasses ASEAN and China, Japan, Korea, Australia and New Zealand, Malaysia continues to enjoy relatively low tariffs with most of our trading partners, Yong said.

That is why the Trump tariffs have minimal impact on Sabah’s international trade and the local economy, he concluded.