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BY ADELINE ANTHONY ALPHONSO
IN a span of just a few months, Malaysia’ s agricultural sector has been confronted with two disruptive policy shifts: a sharp rise in US import tariffs on Malaysian goods and the reinstatement of the Sales and Service Tax( SST) on essential farming inputs, such as fertilisers and agrochemicals. For an industry already navigating tight margins and volatile commodity prices, the developments have triggered concern over Malaysia’ s input affordability and long-term export resilience.
On Jul 7, 2025, US President Donald Trump announced sweeping tariff hikes on 14 countries, including Malaysia, citing the need for“ reciprocal trade fairness”.
Malaysian exports to the US were initially expected to face a blanket 25 per cent tariff effective Aug 1.
Though intense negotiations followed, and Malaysia eventually secured a revised tariff rate of 19 per cent, the blow to confidence among exporters and investors had already been felt.
According to the Ministry of Investment, Trade, and Industry( MITI), the affected goods include not only electronics and machinery but also palm oil-based products, particularly oleochemicals, a key segment of Malaysia’ s agricultural export portfolio.
Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani, speaking during the Malaysian Palm Oil Council’ s Trade Networking Visit in July, acknowledged the challenge.
He emphasised that palm-derived oleochemicals were challenging to replace in American manufacturing, due to the lack of comparable substitutes
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from soybean oil.
“ There is no real alternative in the U. S. for our palm-based oleochemicals,” Johari said.“ If the U. S. charges us a 25 per cent tariff, ultimately it is the American people who will have to pay.”
“ We’ re almost on par with the lowest rates in ASEAN.
“ Indonesia, which is the world’ s top producer of oil palm and we’ re number two, is also subject to the 19 per cent rate. So, for us, 19 per cent is fair. It’ s not a problem.”
He previously mentioned that only RM20 billion of Malaysia’ s RM186 billion in commodity exports go to the US, and that the country must remain“ agile” and adaptive in redirecting trade flows to other markets.
The Cabinet, he said, had begun reviewing Malaysia’ s strategic options.
RISING COSTS FOR FARMERS AND SUPPLIERS
While exporters were still absorbing the implications of the US tariff hike, domestic producers were grappling with another policy reversal: the reintroduction of the SST on agricultural inputs, effective July 1, 2025.
Items that had previously been zero-rated under the GST system, such as herbicides, pesticides, and fertilisers, are now subject to SST, which raises their prices at the point of sale.
For growers, particularly smallholders operating on thin margins, the timing could not have been worse.
For players in the agrochemical sector, the SST has translated into increased pressure on local production and sales.
Chief Marketing Officer of Ancom Crop Care( ACC), Keith Fu, noted that the SST has affected not only the company’ s internal cost structures but also
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Keith Fu |
the broader distribution landscape for agricultural inputs.
“ The SST is impacting local sales, especially for technical-grade products,” he said.“ But it’ s not affecting our export sales much, since SST is deductible on inputs used for manufacturing products meant for export.”
He noted that it is mainly the formulated products for domestic use that have seen cost increases due to the SST.
This is significant, as these products are commonly used by small and medium-sized plantations and farmers across Malaysia, many of whom are already grappling with tight margins.
Although ACC’ s exports have remained relatively shielded due to SST exemptions, the local market is telling a different story.
“ Locally formulated agrochemical products are feeling the brunt of the tax.
“ Meanwhile, imported agrochemical inputs- such as technical-grade materials- are not as heavily impacted,” Fu said.
This creates a disparity in the market, which could potentially disadvantage local manufacturers over time if no adjustments are made.
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