Kota Kinabalu: The new sweeping tariffs introduced by US President Donald Trump, which have led to a drop in oil prices, are expected to have a significant impact on Sabah, which generates 50 per cent of its revenue from oil and gas.
State Finance Minister Datuk Seri Masidi Manjun described it as a global concern, noting that the implications require the State to reassess its expected losses for the year.
“This is a major issue for Malaysia. I recently spoke with a Senior Vice President from Petronas, who also believes the industry must prepare for a challenging period ahead. A drop in oil prices will undoubtedly affect revenue from this sector,” he said.
Masidi also stressed the importance of Sabah’s industries, especially those reliant on gas pipelines, to take a closer look at domestic safety standards following the Putra Heights fire earlier this week. He urged all stakeholders and gas suppliers to reassess their safety protocols.
“This incident serves as a costly reminder for us to reflect and ensure continued improvement, particularly in high-density areas.”
Sabah Industrial Development and Entrepreneurship Minister Datuk Phoong Jin Zhe said the impact may not be as bad for goods as the state’s export volume to the US is small compared to other regions in Malaysia.
But concerns remain over its impact on key sectors, regional supply chains and foreign investors.
“In 2023, Sabah’s total exports to the United States amounted to RM400 million — that’s only around 0.64pc of our total export value of RM6.28 billion,” he said.
“This is also a drop compared to RM762 million in 2022. In contrast, Sabah imported significantly more from the US — RM1.2 billion in 2023, up from RM837 million the previous year,” he said.
The 24pc tariff would apply to Malaysian goods from April 9. A baseline 10pc tariff on all imports came into effect on April 5.
Phoong said more than 60pc of Sabah’s exports to the US are palm oil-related products, particularly palm kernel oil and crude palm oil, making the sector the most exposed.
“Any changes affecting this sector will certainly have implications,” he said.
“We will work closely with the federal government, including the Malaysian Palm Oil Board (MPOB) and the Ministry of Investment, Trade and Industry (MITI), to assess the potential impact and formulate a coordinated response.”
He said Sabah’s manufacturing sector is still developing and unlikely to be significantly affected.
The state is monitoring the potential impact on its two major foreign investors — China’s Kibing Group, which manufactures solar glass and South Korea’s SK Nexilis, a copper foil producer for EV batteries.
“I’ve already spoken to Kibing and I’ll be meeting SK Nexilis soon to better understand their concerns and how we can support them,” Phoong said.
The two companies, which operate out of the Kota Kinabalu Industrial Park, have recently begun exporting, and Phoong said the state remains committed to ensuring their long-term growth in Sabah.
He said one of the key risks is how the US tariffs on other Southeast Asian nations — including Vietnam (46pc) and Indonesia (48pc) — could trigger a ripple effect in Sabah due to the state’s dependence on imported raw materials and semi-finished goods.
“Sabah doesn’t have a comprehensive supply chain ecosystem. We import clinker, building materials, and industrial inputs from Vietnam, Indonesia and Peninsular Malaysia.
“If their industries are affected, those costs could eventually be transferred to us,” he said.
Despite this, Phoong reiterated that Sabah remains open to international cooperation, including with the US.
“We will continue to see the United States as one of our key partners in advancing mutual growth.
“Sabah is committed to strengthening economic collaboration and exploring new trade and investment opportunities,” he said.
“The risk is real and we cannot be complacent. Engagements are ongoing, and support mechanisms are being considered to help businesses adapt,” he said.
“We are also exploring market diversification and leveraging trade agreements to cushion the effects of the tariff increases.”
Phoong also noted that China remains Sabah’s largest trading partner. In 2023, Sabah exported RM7.5 billion worth of goods to China and imported RM4.2 billion.
This was slightly lower than 2022, which saw RM8.5 billion in exports and RM3.7 billion in imports.
“The global trade landscape is shifting. The so-called ‘Liberation Day’ announced by Trump has sent a shockwave around the world,” Phoong said.
“Sabah must remain alert and adaptable. We need to stay competitive, diversify our markets and build a more resilient local industry.”
