KUALA LUMPUR, 28 October 2025 – Malaysia’s newly formalised trade agreement with the United States has come under fire in the national legislature, as lawmakers warn that parts of the deal may undermine Malaysia’s economic independence and preferential trade status.
During proceedings in the Dewan Rakyat, Pasir Gudang MP Hassan Abdul Karim accused the government of offering away parts of the nation’s wealth and economy without adequate transparency. He described the agreement as “humiliating” and questioned the merits of the terms negotiated by the government’s trade representatives.
Meanwhile, former trade minister Azmin Ali also warned that the pact, branded an “Agreement on Reciprocal Trade”, is anything but reciprocal, contending that it gives the U.S. excessive privileges while constraining Malaysia’s policy flexibility.
Under the agreement announced on the sidelines of the 47th ASEAN Summit on 26 October, Malaysia committed to provide preferential market access for U.S industrial and agricultural goods, while the U.S. maintained a 19% reciprocal tariff on Malaysian exports, albeit granting exemptions to some products.
In response to the backlash, the Parliamentary Special Select Committee on International Relations and Trade said it will convene a hearing inviting the Investment, Trade and Industry Ministry (MITI), the U.S. Embassy, economists and trade-chambers to scrutinise the new deal and its implications for Malaysia’s treaty obligations and sovereignty.
Why This Matters for Malaysia and the Region
For Malaysian industries and Asian investors, the agreement carries both promise and risk:
- The pact provides tariff clarity and investor-visibility, particularly beneficial for exporters and manufacturing firms positioned as “China-plus-one” alternatives.
- Conversely, tighter U.S. access and reduced protections for local incumbents may increase competition in agriculture, manufacturing and services, thinning margins for smaller operators.
- On the technology and critical-minerals front, a side memorandum of understanding on rare-earth elements (REE) signals Malaysia’s ambition to deepen supply-chain roles, yet hinges on capability-transfer, capital investment and environmental management.
- From a geostrategic angle, the agreement may shift Malaysia’s policy posture vis-à-vis both the U.S. and China, raising questions about whether the country retains sufficient autonomy in trade governance and diversification strategy.
What to Watch
- Disclosure of full agreement text — transparency remains a flashpoint. MPs have pressed for full publication so stakeholders can assess all obligations.
- Impact on key sectors — particularly agriculture (e.g., dairy, meat), manufacturing (SMEs) and services which may face increased U.S. competition under “non-discriminatory” access clauses.
- Malaysia’s rare-earth strategy — whether local players capture value in processing/refining rather than raw-exporting, and how the REE MoU is turned into concrete investment.
- Alignment with existing FTAs and ASEAN commitments — how this bilateral deal interacts with multilateral treaties and Malaysia’s broader trade diversification agenda.
