The 24% reciprocal tariff on imports from Malaysia to the United States, effective April 9, has sent ripples through various sectors, but the construction industry in Malaysia is expected to weather the storm with minimal direct impact. MIDF Amanah Investment Bank Bhd, in its Construction Sector Report, asserts that construction is fundamentally a domestic-facing industry, largely insulated from the export-driven shocks that might affect sectors like automotive or consumer electronics. This insulation means that the immediate repercussions of the tariffs on the construction sector are likely to be muted.
The investment bank highlights that companies under its coverage, including Malaysian Resources Corporation Bhd, WCT Holdings Bhd, Malayan Cement Bhd, Cahya Mata Sarawak Bhd, Gamuda Bhd, and Sunway Construction Group Bhd (SunCon), have no direct revenue exposure to the US market. This domestic focus shields them from the direct brunt of the tariffs. Even IJM Corporation Bhd, which has some exposure through industrial concrete products exports to the US, is expected to remain largely unaffected due to the limited scale of these exports.
The report underscores that while tariffs could indirectly impact the sector through input inflation, particularly if global steel or cement prices rise due to supply chain disruptions, the overall effect is anticipated to be minimal. For instance, SunCon’s data centre projects for US-based hyperscale clients are conducted locally in Malaysia, thereby falling outside the scope of US tariffs. This local focus ensures that the construction work remains unaffected by the tariff action.
MIDF maintains a positive outlook on the construction sector, citing a favourable cost environment and steady project momentum. Steel bar prices have been easing for the fourth consecutive month due to global oversupply, while cement prices have remained stable thanks to disciplined domestic production and controlled raw material costs. These factors help mitigate margin pressures for contractors.
The report also notes that recent geopolitical developments, such as the Liberation Day tariffs, have introduced some volatility. However, the construction sector’s domestic focus and low direct exposure to US markets limit the impact. Key inputs remain reasonably priced, and sector fundamentals are bolstered by healthy job flows, a robust pipeline of industrial and infrastructure projects, and sustained data centre demand.
As of February 2025, the monthly average price for cement has held steady at RM380 per tonne for the 19th consecutive month since July 2023. This stability is attributed to a balanced supply-demand dynamic and consistent raw material costs, which ease cost pressures and help sustain prices. This stability is a testament to the sector’s resilience and its ability to navigate external shocks.
The construction sector’s ability to remain largely unaffected by the US-Malaysia tariff action underscores the importance of domestic focus and strategic planning. As the industry continues to navigate geopolitical uncertainties, its resilience and adaptability will be crucial in maintaining steady growth and ensuring the sustainability of projects. The sector’s positive outlook, supported by favourable cost environments and a strong project pipeline, positions it well to weather future challenges and continue driving economic growth in Malaysia.
