Zafrul Malaysia Could Face Tariff Up To 100pct If Us Trade Deal Rejected

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Malaysia could face punitive tariffs of up to 100 percent on its exports to the US if it had rejected the recently concluded Malaysia-US Reciprocal Trade Agreement; Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz said today.
Responding to former prime minister Muhyiddin Yassin’s criticisms of the deal, Zafrul (above) said rejecting the agreement would not only threaten Malaysia’s export competitiveness but also undermine investor confidence in the country.
“If Malaysia rejects this agreement, the US government is expected to restore tariffs to the original rate of 24 percent or to a much higher rate - 30 percent, 40 percent, 50 percent, or even 100 percent.
“This would directly cripple the competitiveness of Malaysian exports to the US market,” he said on Facebook today.
Zafrul stressed that Malaysia’s negotiations were necessary to safeguard national interests and protect millions of livelihoods across key industries such as electrical and electronics, aerospace, rubber, cocoa and pharmaceuticals.
Perikatan Nasional chairperson Muhyiddin, yesterday said that while US President Donald Trump’s administration has described the agreement as an achievement of “mutually beneficial bilateral diplomacy”, such a conclusion is highly inaccurate, misleading, and far from the truth.
“In reality, this agreement contains various hidden traps and time bombs that could harm Malaysia in the future.
“It is laden with economic colonisation agendas that threaten Malaysia’s independence and sovereignty,” the Bersatu president said.
In listing several provisions of the agreement which he took issue with, Muhyiddin asserted that the deal is likely to transform Malaysia into a “proxy or satellite state” of the US in Southeast Asia.
Local think tank, the Institute for Democracy and Economic Affairs (Ideas) had also warned that Malaysia’s pursuit of the deal prioritised national interests over Asean solidarity.
Explaining the six worrying clauses
Zafrul, in his long explanatory statement, also sought to clarify issues related to several clauses in the agreement that Muhyiddin had raised.
These are namely:
Article 3.4 (prohibition of forced technology transfer)
Article 5.1 (sanctions against third countries)
Article 5.2 (strategic export controls)  
Article 5.3 (access to customs data) 
Article 6.1.3 (investment and procurement commitments)
Article 6.2 (rare earths and export restrictions)   
In his statement, Zafrul explained that Article 3.4 of the Malaysia-US Reciprocal Trade Agreement does not prohibit Malaysia from accessing or regulating technology, but rather seeks to prevent forced technology transfer.
He said the clause is a standard provision found in most trade agreements and is intended to protect companies from being compelled to surrender valuable intellectual property such as source codes or trade secrets.
Importantly, he noted that the article explicitly allows the Malaysian government to access proprietary technology or data when necessary for legitimate regulatory or legal purposes, including investigations, maintaining critical infrastructure, or ensuring financial stability.
Addressing Article 5.1, Zafrul again rejected claims that it compels Malaysia to blindly follow US-imposed sanctions on other countries. He reiterated that the clause applies only to matters involving a shared economic concern and must be implemented in accordance with Malaysia’s domestic laws and on a mutually acceptable timeline.
"The provision explicitly stipulates that Malaysia’s actions apply only to matters of ‘shared economic concern’.
“If an issue does not affect Malaysia’s economic interests, we are under no obligation to take the same action or impose similar sanctions as the US. This is a commitment based on mutual concern, not absolute compliance," he said.
Zafrul said that Article 5.2 does not strip Malaysia of its authority or autonomy as alleged by Muhyiddin. Instead, he said that it merely outlines a commitment to cooperate on regulating strategic trade, provided it is in accordance with Malaysia’s domestic laws.
He explained that Malaysia already has a legal framework through the Strategic Trade Act 2010, implemented to protect exporters and domestic businesses from secondary sanctions. 
Remaining clauses
While Article 5.3 allows the US access to customs data, Zafrul said that such access is not automatic. 
He said that three paragraphs within the article, state that data sharing must be carried out through local domestic regulatory process or in accordance with its domestic laws and regulations.
Zafrul said that commitments under Article 6.1.3 do not involve government funds, as they are purely commercial decisions by companies.
"The government merely sought input from multinational corporations (MNCs) and government-linked companies (GLCs) on their existing procurement plans from the US, and compiled these as indicative commitments. These procurements would proceed regardless of the agreement, as they are part of pre-existing commercial plans," he said.
He pointed to the Malaysia Aviation Group’s (MAG) purchase of Boeing aircrafts, announced in March 2025, which occurred before Trump announced the new tariff measures, as an example.
On Article 6.2, Zafrul said that Malaysia remains firm in maintaining its policy prohibiting the export of raw rare earth elements (REE), in order to ensure the growth of domestic downstream industries.
This policy, he said, ensures that value addition, skilled employment, and processing technology are developed and retained within Malaysia.
"We will not return to being a nation that merely extracts and sells raw materials cheaply. The development of strategic resources will take place within Malaysia, under Malaysian law, and with full sovereign control.
"The policy is not meant to block trade entirely, but to restrict the export of unprocessed raw materials so that value creation happens domestically first.
Similar to sectors such as oil and gas, rubber, cocoa, and palm oil, Malaysia does not prohibit the export of processed or value-added products, but encourages downstream activities to maximise value," Zafrul said.
He added that once these materials are processed locally in accordance with Malaysian laws and standards, and once value is created here, the high-value downstream products can then be exported as part of the global supply chain. - Mkini

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