KUALA LUMPUR — While some critics have panned Malaysia’s newly signed Agreement on Reciprocal Trade (ART) with the United States, arguing it undermines the country’s sovereignty, leading economists have come forward to defend the deal, asserting that it is a calculated move that offers significant benefits for Malaysia in the long run.
Senior consultant at Global Asia Consulting and adjunct lecturer at Universiti Teknologi Petronas Samirul Ariff Othman is among the economists who have provided a more nuanced perspective.
According to him, while the agreement may appear asymmetric at first glance, it is not a “surrender” as critics claim. Instead, he describes it as a strategic trade-off that provides Malaysia with crucial economic safeguards, particularly in the form of tariff certainty.
“It’s not a ‘surrender,’ but it is asymmetric,” Samirul told Scoop.
In terms of tariffs, the US has agreed to maintain a baseline 19% tariff on "most" Malaysian exports, with zero tariffs only for a specific subset of goods.
These items, which include semiconductors and certain electronics, are listed in an annex to a US executive order, meaning that relief is selective and ultimately controlled by Washington. This, Samirul pointed out, tilts the balance of the deal towards US interests, with Malaysia offering wide-ranging regulatory concessions in return for limited tariff reductions.
“The US keeps a 19% baseline tariff on ‘most’ Malaysian exports, with 0% tariffs only for products listed in an annex to a US executive order. In other words, relief is selective and controlled by Washington.”
Beyond the tariff issue, Malaysia’s commitment to several non-tariff concessions forms another focal point of the debate. Malaysia has agreed to accept US standards in areas such as safety and emissions for vehicles, food safety regulations, and the certification of drugs and medical devices.
This extends to agreeing to streamline Malaysia’s halal certification system to align with US food safety protocols and easing restrictions on various steel products and remanufactured goods.
"Malaysia agrees to accept US safety/emissions standards for US vehicles; recognise FDA certificates/authorisations for devices and drugs; ease licences on various steel products and remanufactured goods; recognise US food-safety systems and streamline halal certification; refrain from digital services taxes; allow cross-border data flows; keep a moratorium on e-transmission duties; relax broadcasting limits on US content," Samirul said.
Non-tariff concessions: regulatory shifts and long-term implications
Beyond the tariff issue, Malaysia’s commitment to several non-tariff concessions forms another focal point of the debate. Malaysia has agreed to accept US standards in areas such as safety and emissions for vehicles, food safety regulations, and the certification of drugs and medical devices.
This extends to agreeing to streamline Malaysia’s halal certification system to align with US food safety protocols and easing restrictions on various steel products and remanufactured goods.
While these provisions open the door for US firms to operate more freely in Malaysia, they also significantly limit Malaysia’s ability to regulate these sectors independently in the future.
For instance, accepting US standards could constrain Malaysia’s policy flexibility in these areas, particularly in the long run, when changes in US regulations might force Malaysia to adapt accordingly or risk trade disputes.
Perhaps most controversially, Malaysia has committed to refraining from implementing digital services taxes and ensuring free cross-border data flows.
These measures, Samirul pointed out, may have significant implications for Malaysia’s digital policy and media landscape.
Earlier today, PN secretary-general Datuk Seri Mohamed Azmin Ali strongly criticised the agreement between Malaysia and the US, describing it as a “surrender” of the country’s economic sovereignty.
The former International Trade and Industry Minister argued that the deal places Malaysia in a position where it is forced to relinquish significant control over its economy while the United States retains the freedom to serve its own interests.
The former minister pointed to Article 5.1 of the agreement, which mandates that Malaysia follow any US trade sanctions or restrictions imposed on other countries.
He stressed that should the US decide to block imports from nations like China or Russia, Malaysia would be obligated to do the same, even if it negatively impacts the country’s economy. “This clause forces Malaysia to take sides in other people’s conflicts and destroys the neutrality that has long been our strength,” Azmin added.
He also highlighted the risks of Malaysia’s position as a neutral player in the region being undermined by the agreement. “By aligning Malaysia’s policies with US decisions, the agreement risks driving away investors who value Malaysia’s role as a neutral and stable partner in this part of the world,” Azmin warned.
Critical minerals: a potential win for Malaysia’s rare earth industry
Another important component of the deal is its provisions regarding rare earths and critical minerals, which are vital to Malaysia’s growing electronics and semiconductor industries. The deal includes language that could pave the way for greater US investment in Malaysia’s rare earth sector, provided the country enforces restrictions on the export of raw materials.
“Malaysia could stand to benefit greatly here,” Samirul observed.
“If Malaysia can manage its rare-earth resources well and use this agreement to attract US investment, the long-term gains could be significant. The key will be whether Malaysia can translate this opportunity into real foreign direct investment (FDI) and technology transfer.”
Looking beyond the criticism
While opposition figures continue to call the deal a “surrender,” senior researcher Muhammad Daniel Kittu of the Social and Economic Research Initiative (SERI) pointed to a broader view of the trade agreement.
He stressed that the US remains a major trading partner for Malaysia, and securing tariff certainty is a critical advantage in an increasingly uncertain global trade environment.
“If we were just looking at the black and white of the trade deal, it might be tempting to say it’s lopsided,” Daniel said.
“But when we consider the broader context of Malaysia-US relations, and the importance of sectors like semiconductors, this deal is a positive outcome for Malaysia. We should count ourselves lucky, especially when we look at what happened with Canada and the tariffs Trump imposed on them.”
Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, also offered a positive assessment of the deal, calling it a potential “win-win” for both countries. He highlighted the zero-rate tariff on over 1,700 Malaysian products as a critical benefit, particularly for sectors like electronics and agriculture. Additionally, the access to rare earths could spur further US investment in Malaysia’s resource sector.
“Malaysia stands to gain significantly in key areas,” he said. “This agreement could help domestic firms become more competitive, open new investment opportunities, and strengthen Malaysia’s position in the global supply chain.”
A strategic hedge, not a capitulation
While the agreement may lean toward US interests in certain areas, it also secures long-term benefits, such as tariff certainty, greater market access for key Malaysian exports, and the potential to tap into the rare earth sector.
Barjoyai Bardai, a lecturer and economic expert from Universiti Tun Abdul Razak (Unirazak), provided a broader perspective on the deal's impact, acknowledging the historical context of Malaysia's trade relationship with the US "Of course previously we have been enjoying trade with the US without any tariffs for many years. And when the tariffs initially kicked in, it was at a much higher rate. And now they have reduced it to 19%, which is a concession," Bardai said.
He continued, “This is not the best (rate) because there are other countries getting much lower tariff rates, but it (trade deal) is reasonably fair that we are getting an exemption on 1,711 items.” According to Bardai, while the deal may not be ideal, it is still a fair step for Malaysia, given the broader global trade context.
In the short term, Bardai argued, the trade deal’s impact doesn’t seem overly negative. "In the short term, perhaps Malaysia would like to have a soft landing on the tariffs and try to absorb the impact as much as possible, and we have been doing well in that if we look at our GDP."
However, he noted that the medium-term consequences remain uncertain, particularly regarding exemptions for items like semiconductors, which the US has applied selectively to American manufacturers or investors operating in Malaysia.
Bardai also pointed out that the agreement contains clauses that allow Malaysia to exit the deal if necessary in the future.
“There are always clauses in the agreement for us to exit if required in the longer term. So in that respect, Malaysia is not doing bad in the agreement.” - October 27, 2025
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