As the Trump administration threatens steep tariffs on BRICS nations, Sabah’s export-driven economy faces growing uncertainty. 

The state, a major producer of palm oil, rubber, and crude petroleum, could see demand shrink if its biggest trading partners—China and India—are affected by U.S. trade restrictions.

Sabah’s billion-dollar export industries at risk

Sabah’s economy leans heavily on commodity exports. In 2023, the state exported RM16 billion worth of crude palm oil, while rubber production hit 41,400 metric tons. Meanwhile, crude petroleum remains its top export, bringing in RM24.7 billion in 2021.

However, these industries are now vulnerable. Malaysia’s application to join BRICS could make its products a target of Washington’s protectionist policies.

“If the U.S. raises tariffs on BRICS trade, it won’t just affect China or India—it will hurt Malaysia and, by extension, Sabah,” said an industry analyst.

Palm Oil: A global trade battle brewing?

Palm oil is a critical industry for Sabah, but past disputes over environmental concerns have already limited its market access. If new U.S. tariffs make it harder to export, smallholders and large plantation companies alike could struggle.

China and India are two of Malaysia’s largest palm oil buyers, and if their economies slow due to U.S. trade measures, demand could fall.

“We are already dealing with the EU’s deforestation rules,” said a Sabah-based plantation owner. 

“If the U.S. follows with its own restrictions, we’ll need to find new markets fast.”

Rubber and oil: collateral damage in a trade war?

Sabah’s rubber industry is similarly exposed. Much of its output is shipped to China for processing, but if U.S. tariffs disrupt global supply chains, demand could drop.

The crude petroleum sector, while not directly exporting to the U.S., could still be affected. A slowdown in BRICS economies—particularly China—would reduce oil demand, leading to price fluctuations that could hurt Sabah’s revenue from petroleum exports.

Malaysia’s warning: “There will be some initial turbulence”

Prime Minister Datuk Seri Anwar Ibrahim has not dismissed the risks posed by U.S. tariffs but believes global trade resilience will prevail.

“I think there will be some initial turbulence, but I believe reason will prevail because the interdependence is so great,” he told the Financial Times.

He also emphasized that American corporations have significant trade interests in Asia and suggested this could act as a stabilizing factor against prolonged trade barriers.

Trade Minister Tengku Zafrul Aziz has echoed concerns about how tariffs could disrupt the global semiconductor supply chain, in which Malaysia plays a key role.

“The U.S. is Malaysia’s third-largest trade partner, and U.S. firms are the main investors in our semiconductor sector,” he told Reuters. “A 100% tariff could harm both parties because our industries are interdependent.”

Sabah’s trade ties with the U.S.: Indirect but significant

Malaysia exported $44.2 billion worth of goods to the U.S. in 2022, but the exact contribution from Sabah is unclear.

What is clear, however, is that if Washington tightens trade restrictions, it could indirectly impact Sabah’s economy. Any slowdown in demand for Malaysian commodities could force local businesses to look elsewhere—or face declining revenues. – January 30, 2025.