The United States and Malaysia have reached a new Agreement on Reciprocal Trade aimed at deepening their economic ties. The agreement, announced by both governments, is designed to give exporters from each country greater access to the other's markets. It builds on the United States-Malaysia Trade Investment Framework Agreement that was signed in 2004.
According to the terms of the agreement, Malaysia will provide preferential market access for U.S. industrial goods such as chemicals, machinery, electrical equipment, metals, and passenger vehicles. In addition, U.S. agricultural exports including dairy products, horticultural items, poultry, processed foods, beverages, pork, rice, and fuel ethanol will benefit from improved access.
The United States has agreed to maintain reciprocal tariffs at 19 percent for Malaysian goods as initially set in Executive Order 14257 issued earlier this year. Certain products listed in Annex III of Executive Order 14346 will receive a zero percent tariff rate.
Malaysia has also committed to addressing non-tariff barriers that impact trade in key industrial sectors. This includes accepting U.S.-manufactured vehicles built to American safety and emissions standards; streamlining import licenses for steel-related products; simplifying halal requirements for items like cosmetics and pharmaceuticals; and responding to concerns about conformity assessment procedures.
On food and agriculture trade issues, Malaysia will accept certificates issued by U.S. regulatory authorities and streamline registration requirements for imports of American food products. The country will also implement regionalization measures related to animal diseases.
Environmental protection is another focus area under the agreement. Malaysia has pledged to enforce its environmental laws more effectively by tackling illegal logging and wildlife trade as well as unregulated fishing practices.
To address intellectual property rights concerns and customs procedures, both countries have finalized commitments covering digital trade barriers and state-owned enterprise behavior. Malaysia has promised not to impose discriminatory digital services taxes or require payments from U.S.-based social media platforms into domestic funds. Data transfers across borders are also protected under the new arrangement.
Labor rights form part of the deal as well: "To protect internationally recognized labor rights, Malaysia has made commitments on preventing forced labor and effectively identifying and addressing labor law violations in sectors with a high-risk of forced labor and child labor."
In terms of supply chain security and investment cooperation, both sides have agreed on steps intended to boost resilience against duty evasion while promoting innovation in critical industries such as rare earth elements production.
Malaysia will not ban or limit exports of critical minerals or rare earths destined for the United States. It will work with American companies on developing these sectors further by granting extended operating licenses meant to encourage increased production capacity.
Commercial transactions between businesses in both countries are expected following this agreement: procurement deals involving aircraft purchases with options for additional units; large-scale purchases of semiconductors and aerospace components estimated at USD150 billion; annual liquefied natural gas contracts worth up to USD3.4 billion; coal and telecommunications deals valued at over USD204 million; plus capital investments totaling USD70 billion into the United States.
The statement notes: "The United States may positively consider the effect that the Agreement has on national security, including taking the Agreement into consideration when taking trade action under section 232 of the Trade Expansion Act of 1962..."
Additionally, discussions are ongoing between the U.S. Department of Treasury and Bank Negara Malaysia regarding mutual understanding on currency policy matters.
Both governments plan to complete domestic formalities before bringing this agreement into force.