KUALA LUMPUR, 26 October 2025 — Malaysia has successfully negotiated a bilateral trade agreement with the United States, under which the U.S. will maintain a 19% tariff rate on Malaysian exports, while granting exemptions on 1,711 tariff-lines, according to the Ministry of Investment, Trade and Industry Malaysia (MITI).
Under the deal, key Malaysian export categories including palm oil, rubber products, cocoa, certain aircraft components, spare parts and pharmaceuticals will be excluded from the 19% tariff, safeguarding approximately US$5.2 billion, or 12% of total Malaysian exports to the U.S., from immediate tariff exposure.
The agreement was formalised on the sidelines of the Association of Southeast Asian Nations (ASEAN) Summit in Kuala Lumpur on 25 October, with U.S. President Donald Trump and Malaysia’s Prime Minister Anwar Ibrahim among the signatories.
Strategic Significance & Economic Implications
- The retention of a 19% tariff rate, compared with the higher 25% initially threatened by the U.S., indicates Malaysia managed to secure a more favourable outcome.
- Exemptions for export-critical sectors help shield Malaysia’s export-driven economy from immediate heavy tariff burdens and preserve competitiveness in key markets.
- The agreement also included commitments to liberalise U.S. goods into Malaysia, streamline regulatory barriers and enhance bilateral investment flows.
Why This Matters for Malaysia and the Region
- Malaysia’s export market to the U.S. is substantial, ensuring tariff stability helps maintain investor confidence and export momentum.
- In the context of ASEAN, Malaysia’s deal may serve as a template for other member states seeking to mitigate U.S. tariff risks amid global trade realignments.
- The timing, coinciding with the ASEAN Summit, reinforces Malaysia’s role as a regional trade facilitator and its strategic positioning between major powers.
Key Considerations & Risks
- Although exemptions cover many important lines, the continuing 19% tariff on the broad export base remains a cost to competitiveness, especially compared to markets enjoying lower or zero tariffs.
- Continued reliance on existing exemptions leaves Malaysia vulnerable if future U.S. policy shifts or enforcement mechanisms change.
- Effective implementation, tracking of exempt lines, and monitoring of sector-specific impacts will be essential to ensure actual benefits accrue rather than simply headline concessions.
Outlook
Going forward, Malaysia will likely intensify dialogue with the U.S. on further tariff reductions, seek greater market access for Malaysian goods and aim to embed the safeguards of the agreement into longer-term frameworks. For ASEAN, this development adds impetus to collective efforts in trade diversification and economic resilience.
