Malaysia’s Trade Agreement with the United States: A Defiant Defense
Malaysia's Minister of Investment, Trade and Industry, Datuk Seri Tengku Zafrul Abdul Aziz, recently delivered a strong defense of the country’s new trade agreement with the United States. He dismissed claims that the deal was a concession to American interests, emphasizing that it was the best possible outcome under challenging circumstances.
During a speech in the Parliament building, Tengku Zafrul accused critics of not fully understanding the intense negotiations that took place behind the scenes. He pointed out that some opposition lawmakers had argued the agreement would make Malaysia subordinate to American interests. However, he maintained that Malaysia had no choice but to negotiate, given the pressure from the US market.
He highlighted the stakes involved, explaining that Malaysia initially faced a 24% tariff, which was later increased to 25%, despite bilateral trade reaching RM325 billion in 2024. Through six months of negotiations, Malaysia managed to secure a reduced tariff of 19%, the lowest among ASEAN nations, along with exemptions for over 1,700 product categories.
These exemptions include significant exports to the US such as pharmaceuticals, cocoa, and aircraft components, valued at approximately RM22 billion. This addition to the existing exemption for semiconductors ensures continuous access for Malaysian goods to the US market. Without this agreement, Tengku Zafrul warned that Malaysia could face tariffs as high as 40% or even 100%, which would negatively impact workers and exporters.
Addressing Misconceptions About the Agreement
Tengku Zafrul also addressed specific criticisms about Article 5.1 of the agreement, which some claimed would force Malaysia to follow US trade actions against third countries. He clarified that the clause only compels action in matters of shared economic and security interests, acting as a protective “guardrail” rather than a “blank cheque” for US demands.
“This is not a license for America to demand Malaysia to act the same,” he said, highlighting the protective nature of the clause.
On concerns about halal integrity, Tengku Zafrul was clear. He stated that Malaysia’s halal standards are determined by the country, verified by Jakim, and maintained by Muslims in Malaysia. He emphasized that certification authority remains with the Department of Islamic Development.
Commercial Decisions and Energy Security
Regarding Petronas’ decision to import liquefied natural gas (LNG) from the US, Tengku Zafrul explained that it was a commercial move aimed at ensuring “long-term energy security.” He stressed that this was not a political order from Washington, but a commercial decision by Petronas to ensure stable supply.
“The country must have various energy sources and options, that is called energy security not dependency,” he said.
On rare earth elements (REE), Tengku Zafrul rejected claims that Malaysia was opening its doors to exporting unprocessed minerals. He reiterated that the nation’s ban on raw REE exports remains in place, and any development involving partnerships with countries like Australia must involve local processing to create high-skilled jobs and build industrial capacity.
A Unique Trade Agreement
Tengku Zafrul noted that the agreement could not be compared to a standard Free Trade Agreement (FTA), as it was a response to an “unprecedented, unilateral tariff situation imposed without consultation.”
He commended the civil servants and the negotiation team for their work under extraordinary circumstances.
Diversifying Trade Ties
Looking ahead, Tengku Zafrul mentioned that the government is actively diversifying trade ties with partners like South Korea, the UAE, and through the Asia-Pacific Trade Agreement (APTA). He reiterated that Malaysia is a sovereign nation that is not bound to any other country.
“Malaysia is not a country that obeys any power,” he said. “We are a respected nation capable of standing on our own, defending our sovereignty, and protecting the interests of our people.”