How Us Malaysia Trade Pact Sells Our Sovereignty Short

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The recently signed Malaysia-US Reciprocal Trade Agreement is being celebrated by some as a diplomatic triumph.
In reality, it represents a stunning retreat from our principles of non-alignment and economic self-interest, surrendering our national policy autonomy in exchange for meagre concessions.
Unelected Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz dares to claim this to be the "best deal for Malaysia."
The numbers expose this as fiction. The agreement secures zero tariffs, at most, for 12 percent of our exports - valued at approximately US$5 billion (about RM21 billion). More credible independent analyses suggest that the actual figure could be as low as US$1 billion, a paltry 2.4 percent of our total exports, with the vast majority of our products facing a 19 percent tariff.
The arithmetic alone renders the claim of a "good deal" untenable. For context, our neighbour Singapore faces only a 10 percent tariff.
The actual cost of this agreement is not measured solely by tariffs, but by the sweeping surrender of our policy autonomy. Malaysia has signed 16 free trade agreements (FTAs); none have contained such invasive and humiliating provisions.
Veto on future trade ties
Critically, the agreement grants the United States a de facto veto over our future trade relations, allowing them to terminate the pact and reimpose tariffs if we sign an FTA with a nation deemed to "jeopardise essential US interests".
This subordination is clearly stated in Article 5.3, which states that, “If Malaysia enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardises essential US interests, the United States may, if consultations with Malaysia fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025”.
This also extends to digital trade agreements (Article 3.3: Digital Trade Agreements: Malaysia shall consult with the United States before entering into a new digital trade agreement with another country that jeopardises essential US interests).
These two clauses clearly subordinate our national economic strategy to the geopolitical interests of a foreign power. This is a chilling throwback to the era of British adviser and the Malay sultans, where advice was, in effect, a command.
If this is not a submission to a foreign country, then what is this?
Even more alarming is Article 5.1, which obligates Malaysia to "mirror" any unilateral US economic or national security sanctions against third countries.
“If the United States imposes a customs duty, quota, prohibition, fee, charge, or other import restriction on a good or service of a third country and considers that such measure is relevant to protecting the economic or national security of the United States, the United States intends to notify such measure to Malaysia for economic and national security alignment.
“Upon receiving such notification from the United States, Malaysia shall adopt or maintain a measure with equivalent restrictive effect as the measure adopted by the United States or agree to a timeline for implementation that is acceptable to both Parties, to address a shared economic or national security concern, guided by principles of goodwill and a shared commitment to enhancing bilateral relations between the United States and Malaysia.”
If the US decides to wage an economic war on China, Vietnam, or any other nation, we are compelled to follow, abandoning our own assessment of our national interest. This clause alone shreds our non-aligned foreign policy, making us an enforcer of America’s trade war.
And if, at all, another country poses a threat to Malaysia’s economy or national security, why can’t Malaysia decide on its own what is best to secure its economic or national security interests?
Abnormal times
Furthermore, the commitment to channel nearly RM1 trillion in investment - roughly 12 times our annual development budget - into an economy seven times richer than ours, including mandating Petronas to purchase RM10 billion of US liquefied natural gas (LNG) annually, is not free trade nor commercial sovereignty.
The unelected minister proudly claims that Petronas' purchasing LNG from the US is "nothing new," but he misses the point. Petronas has always had the commercial freedom to buy LNG from anywhere globally, including from the US.
What is absolutely not normal and unprecedented in our nation's history is for the government of Malaysia to sign an agreement that mandates Petronas to purchase LNG from the US.
No previous government in any of our free trade agreements with other countries ever accepted such a term. His defence is not just wrong - it is a blatant attempt to hide a terrible concession.
At the same time, this agreement also discriminates against our own domestic interest [Article 6.2: Malaysia shall ensure that its State-Owned or -Controlled Enterprises (SOEs) operating in its market, when engaging in commercial activities - (a) act in accordance with commercial considerations in their purchase or sale of goods or services; and (b) refrain from discriminating against US goods or services. Malaysia shall refrain from providing non-commercial assistance or otherwise subsidising its goods-producing SOEs, except for the achievement of their public service obligations. Malaysia shall ensure a level playing field for US companies in Malaysia’s market with respect to SOEs of third countries]” - dismantling support for our government-linked companies and potentially even grants for micro, small and medium enterprises, effectively tying one hand behind our back and handicapping our own enterprises in the home market.
Although we can all agree that some of these GLCs need significant reform, why is the government agreeing to punish Tabung Haji, Permodalan Nasional Berhad, Employees Provident Fund, and other entities owned by the rakyat, rather than helping US entities?
Rolling back the years
The agreement further mandates that we open our markets wide to US products, including vehicles and agricultural goods, a concession not granted to our long-term partners in Asean or elsewhere.
This is explicitly laid out in Article 2.3: Agriculture, which states that “Malaysia shall provide non-discriminatory or preferential market access for US agricultural goods as set forth in this Agreement,” a dictate reinforced by clauses in Annex III, Section 2 on Non-Tariff Barriers.
This is the age-old Washington Consensus model, which has been so discredited over the last 35 years. The prime minister and the trade minister seem happy to roll back the years.
Simultaneously, we have agreed to dilute the authority of the Islamic Development Department (Jakim), allowing any US-certified halal logo to be used on products entering Malaysia, which could potentially undermine our global leadership in the halal economy and constitute a discriminatory concession not offered to other trading partners (Annex III: Article 2.5: Halal Certification for Industrial Goods 1. Malaysia does not require industrial goods, including cosmetics, pharmaceuticals, and medical devices, to be certified halal and shall not impose any such requirement. 2. Malaysia shall allow the usage of a halal logo issued by any US Halal certifier designated by the Department of Islamic Development Malaysia).
While many will agree that Jakim needs to be overhauled and the halal system significantly improved, why have we agreed to dilute our authority on these matters, allowing any US-certified halal logo to be used on products entering Malaysia, potentially undermining our global leadership in the halal economy?
Would we offer this same concession to China or India, both with larger Muslim populations? This is a blatantly discriminatory policy, favouring only the US.
The government has also agreed not to impose a digital tax on any US firms, despite the digital tax having been in effect since 2020 (Article 3.1: Digital Services Tax: Malaysia shall not impose digital services taxes, or similar taxes, that discriminate against US companies in law or in fact).
This is a fiscal loss; the government collected RM1.6 billion from 464 foreign entities from 29 countries last year alone. Would we now exempt all of them, too?
Fiscal surrender
They are also not required to contribute six percent of their revenue to the USP Fund, managed by MCMC (Article 3.1: Regulation of Social Media Platforms and Cloud Providers, Section - Malaysia shall remove the requirement for US social media platforms and cloud providers to contribute six percent of their revenue generated in Malaysia to a domestic fund in order to operate in Malaysia).
The fund, set up in 2002, aims to bridge the digital divide in Malaysia and is funded by more than 30 firms, including Maxis, Telekom, and others. Why are American firms exempted, and not our own local entities? Have we solved our digital divide? The answer is obvious.
This fiscal surrender extends to taxes. According to Annex III: Article 1.2: Sales and Service Tax (SST), “Malaysia shall exclude US exports of agricultural and seafood products from Malaysia’s consumption tax”.
This clearly undermines the SST's original intent on taxing foreign products, including fruits, to protect local agriculture and fisheries industries. This move not only contradicts official policy but also sets a troubling precedent – must we now extend these privileges to all countries?
This agreement’s damage extends far beyond economics; it is a strategic instrument that forcibly aligns us with US foreign policy to contain China. Annex III: Article 5.2: Equipment and Platform Security commits “Malaysia (to) only using communication technology suppliers that do not compromise the security, safeguards, and intellectual property of ICT infrastructure, including 5G, 6G, communication satellites, and undersea cables,” adding that “The United States and Malaysia will consult on whether suppliers are unable to meet these standards.”
This is a blank cheque to exclude Chinese tech leaders like Huawei. Can the government explain this logic, given that Chinese technology is world-class and a leader in global innovation?
The agreement also has an impact on our local drama, as it forces Malaysia to remove the 80 percent local content quota for terrestrial broadcasters and allow unrestricted foreign programming during prime time (Annex III: Article 2.20: Broadcasting Malaysia shall remove the requirement in broadcast licensing agreements that broadcast stations devote 80 percent of terrestrial airtime to local Malaysian programming, and Malaysia shall allow broadcasting of foreign programming during prime time).
This sounds the death knell for the protection and growth of our local film and television industry. In addition, at a time when most of the world is rejecting the cultural junk exported, particularly from the US, we seem to be doing the reverse.
Bartering sovereignty for a pittance
Malaysia is no stranger to FTAs, having successfully implemented 16 of them since the first Asean FTA in 1993. Not one of these previous agreements - whether with Japan, Australia, India or with our regional partners - compromised our right to self-determination.
No past Malaysian prime ministers or trade ministers, from any party, have ever begged for policy permissions from a foreign country, and surrendered our right to self-rule, or willingly turned our economy into a resource colony.
They had bartered away our sovereignty in a deal so grotesquely one-sided, so reminiscent of a bygone era of vassal states, that it sets a gold standard for how not to represent a nation's interests.
Let’s be clear: this is not a trade agreement; it is a surrender to a hegemon. The government has bartered away Malaysia’s sovereignty for a pittance. - Mkini
MUHAMMED ABDUL KHALID is a fellow at the World Inequality Lab at the Paris School of Economics.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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