1 week Ago By Faiqah Kamaruddin
KUALA LUMPUR: Malaysian furniture makers may look beyond the United States and consider shifting operations to countries with more favourable trade terms, industry experts said, warning that a newly imposed 24 per cent tariff could dent competitiveness.While the US remains Malaysia's largest furniture export destination, accounting for RM7.03 billion in sales last year, the sharp cost hike may prompt buyers to shift to alternative sourcing countries, they said.
The Federation of Malaysian Manufacturers (FMM) noted that the sudden tariff could erode Malaysia's pricing edge and reshape buyer sentiment."Customers sourcing from Malaysia may begin redirecting orders to countries not affected by similar duties, particularly those with preferential access to the US or lower operating costs," FMM president Tan Sri Soh Thian Lai told Business Times."For instance, Mexico could become a more attractive option for US based buyers due to its proximity to the US and access to duty-free trade under the United States-Mexico-Canada Agreement.
"Closer to home, Thailand and Cambodia may be considered viable alternatives due to their lower labour costs and established export channels. Such shifts would be driven by cost, supply chain reliability and the need for tariff-free or lower-tariff access to the US market."Soh said the risk of market diversion is real and this could result in lost market share and reduced production activity for Malaysian manufacturers, particularly those heavily reliant on US demand.
"If Malaysia is unable to maintain its competitive edge, it could see reduced production volumes and slower growth in the global furniture industry."Manufacturers are already navigating high operating costs due to rising raw material prices, among others. The uncertainty surrounding potential US tariffs has further compounded these challenges," the president said.
Based on FMM data, Soh said some buyers have started putting orders on hold or postponing shipments, resulting in cash flow pressure and underutilised production lines.Industry players are using the current 90-day window before the tariff takes effect to formulate contingency strategies.These include renegotiating terms with clients or absorbing additional costs to maintain business, measures that may offer short-term relief but are unlikely to be sustainable, especially for smaller firms.
If the situation drags on without a clear resolution, Soh said the industry could face reduced export volumes, declining factory output and potential job losses."The pressure to remain competitive, while navigating higher operational costs and shifting demand, is expected to intensify in the coming months," he added.SSF Home Group Bhd executive director Lok Kok Khong said the wider furniture industry could see changes in sourcing and manufacturing patterns.
Some producers, he added, may explore relocating operations to countries with more favourable tariff conditions."At the same time, we also see an opportunity in Malaysia and the broader Southeast Asian region to offer comparatively lower tariff environments and strong production capabilities, which could attract more sourcing activities from global buyers," he said.Lok said the industry would benefit from proactive measures by the government to enhance competitiveness and resilience.
This includes better trade deals, support for innovation and productivity, and improved infrastructure for manufacturers and retailers."Furthermore, initiatives that promote Malaysia as a regional hub for manufacturing and sourcing could attract foreign investment and bolster the domestic economy," he added.Universiti Kuala Lumpur Business School economic analyst associate professor Aimi Zulhazmi Abdul Rashid stated that Malaysia's furniture market is expected to generate US$4.
59 billion in revenue in 2025, with an anticipated annual growth rate of 3.90 per cent from 2025 to 2029.He noted that it is still too early to determine whether Malaysia will be at a disadvantage compared to other furniture exporters to the US.
This is because the final figures have yet to be confirmed by the US government and may still change depending on the Trump administration's evolving policies."Malaysian companies need to expand the market beyond the US, especially other significant export markets for Malaysian wooden furniture that include Singapore, Japan, Australia and the United Kingdom."No doubt the US will have the largest furniture market in the world with a market size of US$57.
7 billion (RM252.55 billion) in 2023."The world's biggest exporter of furniture is China, hence the trade war may give Malaysia advantage in terms of restructuring of the industry supply chain," Aimi added.
China and Vietnam are widely recognised as leading furniture sourcing countries, valued for their competitive costs, diverse manufacturing capabilities and strong production quality and craftsmanship.Nusantara Academy for Strategic Research senior fellow Dr Azmi Hassan the furniture industry is undeniably one of the most lucrative markets for Malaysia in the US.Unlike the glove industry, where Malaysia holds a pricing advantage over China, the furniture sector operates on a more level playing field.
As a result, Azmi said the additional costs from tariffs are likely to be passed on to American consumers, making furniture more expensive in the US market."This development is a wake-up call for players in the furniture industry. They now need to explore alternative markets, similar to how Malaysia once capitalised on the US luxury market," he added.
Azmi noted that the government is actively seeking new export destinations and stressed that the furniture sector must be part of this diversification initiative.However, he cautioned that markets like Europe may pose challenges due to strict regulations on products made from tropical forest materials."Therefore, the industry must adapt to this situation.
Whether the tariff is 10 per cent or 24 per cent, the impact remains the same, it will raise prices for American consumers and reduce the volume of furniture exports compared to the current levels," he added.Policy measureSoh said the government has a key role to play in addressing this challenge.At the domestic level, he urged policymakers to help ease the overall cost burden on manufacturers, including by reviewing the expanded scope of the Sales and Service Tax (SST) to avoid further straining businesses amid global market volatility.
"We also recommend the immediate formation of a National Supply Chain Council to coordinate trade resilience strategies and for Malaysia to propose an Asean Supply Chain Coordination Council during its 2025 Asean chairmanship," Soh said.These initiatives would help strengthen supply chain continuity and foster deeper regional cooperation in response to evolving global trade risks.Soh said the FMM applauds the Investment, Trade and Industry Ministry's ongoing engagements with its US counterparts and calls for continued efforts to secure Malaysia's exemption from any proposed tariff reclassification.
"Malaysia's longstanding record as an open and rules-based trading nation should be emphasised to support this position."Proactive trade diplomacy is essential to avoid unintended consequences on legitimate Malaysian exporters," he added.© New Straits Times Press (M) Bhd.
