Understanding Malaysia Us Reciprocal Tariff Deal

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MP SPEAKS | Malaysia’s Agreement on Reciprocal Tariff with the United States is the best we have gotten in this difficult situation to protect our economy and our sovereignty. However, there are those who still oppose the deal.
Generally, there are three types of reactions.
First, there is the claim that it is not “reciprocal” but rather asymmetric, with material benefits heavily weighted towards the US.
Second, it is alleged that our national sovereignty was “compromised” or “sold” to the US.
Third, Malaysia is accused of tilting too much towards the US, at the expense of China.
These reactions were centred mainly on:
Article 5.1, the economic and national security alignment commitment;
Article 3.1 for fairness in digital trade and;
Malaysia’s commitment to procure from the US, such as liquefied natural gas by Petronas and Boeing aircraft by the Malaysia Aviation Group.
While these reactions are understandable, they are not supported by factual or contextual reality. I understand some people’s anxiety over this issue in the face of geopolitical and international trade upheaval, but most of the arguments put against the agreement are based on half-truths and selective figures, and some are outright lies.
Reciprocal tariff
The term “reciprocal tariff” comes from the Reciprocal Trade Agreement Act of 1934, which permits the US president to negotiate with trading partners bilaterally without having Congress approval.
US President Donald TrumpPresident Donald Trump reappropriated this old law for his contemporary needs.
Let us be honest here. There is nothing reciprocal or balanced in Trump’s approach. The tariff issue that occupied so much attention in 2025 was a unilateral trade action by the US, and it is asymmetric. This asymmetrical reality affects not only Malaysia but every US trading partner.
On April 2, Trump imposed hefty tariffs on all US trade partners, claiming that trade, especially trade surpluses by trading partners over America, has caused his country great harm and damage.
And ever since then, nations have been engaging in negotiations with the Trump administration. Malaysia was initially imposed a 24 percent tariff, raised to 25 percent in July, and, under the agreement, is set at 19 percent.
If this is the case, why did we still negotiate with the US? Because the whole world, not just Malaysia, is hugely dependent on the US market for its exports. China, Japan, South Korea, Vietnam, Mexico, European Union are all exporters.
To lose access to the US market would inflict severe economic consequences, such as job losses across multiple sectors.
Reduction won’t happen overnight
Can we reduce the dependence on the US market? Of course we can, except that it won’t happen overnight. Prime Minister Anwar Ibrahim has been working hard to engage partners from the Global South, as well as investing time in building a stronger Asean, because we hope that one day we can reduce our dependence on the US market.
For those who claim that, at 12 percent, Malaysia’s export to the US is insignificant or negligible, do not take into account that some of Malaysia’s exports to Singapore and China, components, or partially processed goods are ultimately destined for the US market.
Malaysia has been wanting to negotiate a trade deal with the US, as we do with many other countries. In 2004, the Trade and Investment Framework Agreement was signed to pave the way for the negotiation of a US-Malaysia Free Trade Agreement, but it did not happen.
Subsequently, efforts were made to negotiate the Trans-Pacific Partnership (TPP), which also did not materialise. Ironically, the reciprocal agreement is almost like a trade deal that provides certainty for access to the US market, albeit at the hefty 19 percent tariff rate.
Sovereignty
On the question of national sovereignty, Malaysia’s commitments throughout the reciprocal agreement are consistently qualified by caveats that must be done “in accordance with domestic laws and regulations”.
Even the much-talked-about Article 5.1 comes with maximal caveats. The clause provides that Malaysia would adopt the measures taken by the US against a third country only when “shared economic and national security concerns” arise, and in a manner “guided by principles of goodwill”, “in accordance with domestic laws and regulations”, and “within a timeline acceptable to both Parties”.
Therefore, the deal does not compromise Malaysia’s sovereign ability to balance both the US and China within its shores or to deal with third countries.
As far as Section 3 on digital trade is concerned, the key ask from the US is not to have taxes that only target its corporations.
It does not say Malaysia cannot levy taxes, but requires that such taxes apply to all corporations, and not just those from the US.
Rare earth elements
On rare earth elements (REE), Malaysia’s existing policy is such that the “raw cakes” are not allowed to be exported, except where exceptions are granted by the government through cabinet approval.
The ban on the export of REE in the raw form is to encourage downstream development. The same will apply to the US. In fact, US companies do not currently possess the technological capabilities to process REE; thus, the question is academic for now.
Procurements
On Malaysia’s commitments to procure from the US, as pointed out by Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz, these are commercial decisions and mostly existing procurement decisions, irrespective of the agreement.
The ministry was just collating information to show the depth of the Malaysia-US economic relations. Likewise, the procurement commitment of LNG by Petronas is an existing arrangement which Petronas actually would make a profit from.
This is the factual and contextual reality of the deal, and the truth. Unfortunately, much of the public discourse has been clouded by misinformation, malicious falsehoods, and politically charged narratives.
The opposition should at least be responsible with their facts, and in any way possible, pursue bipartisanship in matters of foreign policy that concern Malaysia’s national interest. - Mkini
LIEW CHIN TONG is Iskandar Puteri MP and deputy investment, trade and industry minister.
The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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