The United States has concluded an Agreement on Reciprocal Trade with Malaysia, signed during the 47th Association of Southeast Asian Nations (ASEAN) Summit in Kuala Lumpur. Once the Agreement enters into force, Malaysia will reduce customs duties on certain U.S.-origin products, address a variety of non-tariff measures, align with the U.S. on certain economic security initiatives, and facilitate investment into the United States and purchases of U.S. products. The announcement also coincides with the formal elevation of the U.S.–Malaysia relationship to a Comprehensive Strategic Partnership, underscoring the agreement’s broader diplomatic and economic significance.
The United States will continue to apply the current general “reciprocal” tariff rate of 19% to originating goods of Malaysia but is expected to set “reciprocal” tariffs to 0% for certain products. The Administration has characterized the Agreement as advancing “reciprocal, fair, and balanced trade,” consistent with its “America First” strategy to strengthen domestic manufacturing and economic security.
Key Tariff Provisions for Both Nations
Under the Agreement, which will enter into force 60 days (or less, if agreed) after each country certifies completion of any necessary domestic legal procedures, the United States will continue to apply a 19 percent baseline reciprocal tariff to “originating goods of” Malaysia, the same tariff rate currently applicable to products of Malaysia per the reciprocal tariff modifications set forth in Executive Order 14326. This reciprocal tariff rate is in addition to the MFN duty rate in effect. In this regard, it is unlike the framework agreements with the European Union and Japan that implicate an interplay between reciprocal tariffs, Section 232 measures, and MFN duties. The Agreement does not affect the applicability of Section 232 measures on imports from Malaysia.
The Joint Statement accompanying the Agreement provides that certain originating goods of Malaysia appearing on the list of Potential Tariff Adjustments for Aligned Partners annexed to Executive Order 14346 will not be assessed any reciprocal tariff. Although Schedule 2 of Annex I to the Agreement similarly references goods “set out in this Schedule,” no such list of identified goods appears. The status of that list is not yet clear.
In exchange, Malaysia has committed to applying a series of tariff rate revisions to “originating goods of the United States,” set forth in Schedule 1 to Annex I to the Agreement. Although, as with Schedule 2, the list of specific goods is not yet part of the publicly released documentation, this provision reflects a variety of approaches to customs duty reduction for different products. These indicate a degree of flexibility in the negotiations and are summarized below:
- Eliminated in Full: customs duties “eliminated entirely” on the date of entry into force of the Agreement
- Eliminated over 5 Years: customs duties “eliminated in five equal annual stages,” such that they are “duty-free effective January 1 of year five.”
- Eliminated over 9 Years: customs duties “eliminated in nine equal annual stages,” such that they are “duty-free effective January 1 of year nine.”
- Reduced to 5%: customs duties “reduced to five percent ad valorem on the date of entry into force of this agreement.”
- Reduced to 10%: customs duties “reduced to ten percent ad valorem on the date of entry into force of this Agreement.”
- Reduced to 10% or RM20: customs duties “reduced to ten percent ad valorem or RM20.00 each, whichever is the higher on the date of entry into force of this Agreement.”
- Reduced to 15%: customs duties “reduced to 15 percent ad valorem on the date of entry into force of this agreement.”
The Agreement also provides that certain goods will remain subject to duties of 0%, 2%, 3%, 5%, or “the applied MFN import duty rate,” respectively. Annex III details certain additional adjustments to Malaysian duty and tax assessments for U.S. internal combustion engine vehicles, distilled spirits, agricultural products, and seafood products.
Notwithstanding Malaysia’s commitment not to impose GATT-inconsistent quantitative restrictions on “originating goods of the United States,” Malaysia will maintain tariff rate quotas for certain sensitive agricultural products: live swine, meat of swine, unconcentrated milk and cream, and fresh or preserved birds’ eggs.
However, a significant exception to the above-described tariff provisions exists for both the United States and Malaysia. Section 7.4(1) provides that the Agreement does not prevent any party “from imposing additional tariffs to remedy unfair trade practices, to address import surges, to protect its economic or national security, or for other similar reasons consistent with its domestic law.” Insofar as action under the International Emergency Economic Powers Act (IEEPA) is inherently grounded in concerns regarding U.S. economic or national security, this exception (which is absent from the U.S.-Cambodia agreement) may have significant implications over the life of the Agreement.
As for which goods may benefit from these tariff concessions, the agreement does not set forth alternative rules of origin. It does, however, provide that a party “may establish rules of origin” as necessary to ensure that the Agreement’s benefits “accrue substantially to the {Parties} and their nationals.” Relatedly, Malaysia undertakes to “coordinate and endeavor to align its border measures applicable to third-country imports with relevant border measures that the United States may adopt in the future . . . to combat regulatory arbitrage that would disadvantage U.S. workers and businesses.”
Non-Tariff Expansion of Market Access in Malaysia
The bulk of the Agreement describes Malaysia’s non-tariff concessions, many of which expand market access for American industries, including agriculture and automotive sectors. Malaysia’s key commitments are summarized below:
- Not restrict the importation of U.S. originating goods through the application of import licensing, particularly non-automatic licensing regimes. Annex III identifies steel products, in particular, for remedial action.
- Allow U.S. originating goods (including automobiles, medical devices, and food or agricultural products) to enter Malaysia without additional conformity assessment requirements, upon complying with “applicable U.S. or international standards, U.S. technical regulations, or U.S. or international conformity assessment procedures.”
- Base sanitary and phytosanitary (SPS) measures on science and risk assessment; do not deploy SPS measures as disguised restrictions on bilateral trade.
- Streamline halal certification procedures for U.S. agricultural products and avoid imposing halal certification requirements on industrial goods.
- Ensure transparency and fairness with respect to the protection or recognition of geographical indications. Only protect or recognize a term where there is a given “quality, reputation, or other characteristic of the good that is essentially attributable to its geographical origin.” Annex II sets forth a specific list of unrestricted cheese and meat terms.
- Join the Global Forum on Steel Excess Capacity and “take effective actions” to address global excess capacity in the steel sector and its impacts.
- Provide robust intellectual property protection standards and enforcement, including “fully implement{ing}” eight intellectual property agreements and ratifying five new intellectual property agreements within two years of the Agreement’s entry into force. The agreements are identified in Article 2.17 of Annex III.
- Extend, mutatis mutandis, any commitment concerning trade in services that Malaysia has made or hereafter makes in a trade agreement to any third country, jurisdiction, or economy (other than ASEAN or under ASEAN agreements).
- Adopt and implement good regulatory practices at the central government level, essentially a series of administrative process improvements.
- Protect internationally recognized labor rights in Malaysia’s domestic law and through effective enforcement thereof, including by creating or maintaining necessary institutions to protect labor rights and “address{ing} any . . . weakening or reduction that has been made to encourage trade or investment to date.” In part, this provision is likely aimed at combating wage suppression. Annex III requires specific reforms that would affect bargaining rights, migrant workers, and the elimination of forced labor in Malaysia.
- Adopt and maintain environmental protections that are effectively enforced. Although the overarching guideline (“high levels of environmental protection”) lacks measurable standards, specific actions with respect to illegal logging, fishing, and wildlife trade are prescribed in Articles 2.25, 2.28, and 2.29 of Annex III.
- Facilitate technology solutions to allow digitized customs procedures, including the electronic submission and processing of pre-arrival data for low-risk express shipments from the United States.
- Not impose discriminatory value-added taxes.
- Not impose customs duties on electronic transmissions, although certain internal taxes and fees may be maintained. (This commitment is also undertaken by the United States)
- Not impose discriminatory digital service taxes or otherwise discriminate against U.S. digital services or U.S. products distributed digitally.
- Ensure cross-border electronic data transfers across trusted borders with appropriate protection.
- Protect proprietary data submitted by U.S. traders to the Royal Malaysia Customs Department from unauthorized disclosure and ensure that digital logistics platforms used by Malaysian ports protect against, e.g., unauthorized data disclosure and data-access by other foreign governments.
- Not impose conditions or enforce any undertaking that would require U.S. persons to undergo forced technology transfer as a condition for doing business in Malaysia. However, certain exceptions are provided, including with respect to government procurement, government “prudential” measures, and software used for critical infrastructure.
- Ensure that state-owned or -controlled enterprises (SOEs) operating in Malaysia act in accordance with commercial considerations in the purchase or sale or goods or services and refrain from discriminating against U.S. goods or services.
- Refrain from “providing non-commercial assistance or otherwise subsidizing its goods-producing SOEs, except for the achievement of their public service obligations.”
- Provide non-confidential information regarding “all forms of non-commercial assistance or subsidies that it provides to a manufacturing enterprise in its territory” and address their distortive impacts on bilateral trade. More generally, Malaysia will commit to “expand cooperation and exchange information” related to “our respective antidumping and countervailing duty proceedings (to include circumvention inquiries).” If effectively implemented, this could streamline data-gathering in a variety of U.S. AD/CVD investigations.
Restrictions on Third-Country Agreements
Some of Malaysia’s commitments under the Agreement purport to restrict or place conditions upon Malaysia’s entry into certain arrangements with third countries, third-country entities, or international organizations. These include:
- Prohibiting agreements that include “non-scientific, discriminatory, or preferential technical standards or third-country SPS measures that are incompatible with U.S. or international standards”
- Requiring consultations with the United States “before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.”
- Requiring Malaysia to support multilateral adoption of a permanent moratorium on customs duties on electronic transmissions at the WTO.
- Providing for reimposition of the 24% country-specific reciprocal tariff rate set forth in Executive Order 14257 if Malaysia “enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardizes essential U.S. interests.”
- Prohibiting Malaysia from purchasing “any nuclear reactors, fuel rods, or enriched uranium” from “certain countries” (that are not named in the Agreement or its Annexes), except where there are no alternative suppliers on comparable terms and conditions.
- Prohibiting Malaysia from using communication technology suppliers that compromise the security, safeguards, and intellectual property of ICT infrastructure, including 5G, 6G, communication satellites, and undersea cables. Such suppliers will be determined by U.S.-Malaysian consultation.
Investments and Purchases
In the U.S. market, Malaysia has committed, “to the extent practicable,” to invest approximately USD $70 billion in “job-creating investment” in the United States over the next 10 years. Malaysia also “intends to purchase, or to facilitate the purchase by Malaysian companies, of” certain originating goods of the United States. Annex IV summarizes the purchases envisioned, the highest value of which include Boeing aircraft, liquefied natural gas, coal, semiconductors, aerospace components and equipment, and data center equipment.
In the Malaysian market, Malaysia will “facilitate and promote” investment by the United States in certain identified sectors: “critical minerals, energy resources, power generation, telecommunications, transportation, and infrastructure services.” Indeed, Article 6.2(2) of Annex III specifically “commit{s} to the expedient development of {Malaysia’s} rare earth and critical mineral sector in partnership with U.S. companies to ensure secure and diversified supply chains” and the issuance of “extended operating licenses” to enhance investment certainty. Malaysia otherwise promises to promote the recovery of critical minerals from domestic waste streams. For its part, the United States commits to working through the EXIM Bank and U.S. International Development Finance Corporation, if eligible, to “consider supporting investment financing in critical sectors in Malaysia in collaboration with U.S. private sector partners.” The U.S. also commits to “streamline and enhance” bilateral defense trade.
New Commitments on Trade Enforcement & Alignment
Consistent with other recently announced Framework Agreements, the U.S.-Malaysia Agreement covers matters beyond trade and investment, including security and strategic economic alignment. Malaysia is encouraged to mirror U.S. import and export restrictions in several ways and otherwise attempt to reign in third country entities operating in Malaysia.
Special tariff and non-tariff actions
The United States will notify Malaysia of any tariff, quota, prohibition, fee, charge, or import restriction on a third country good or service relevant to protecting U.S. economic or national security. In response, Malaysia shall “adopt or maintain a measure with equivalent restrictive effect” as that of the United States, or “agree to a timeline for implementation that is acceptable to both Parties, to address a shared economic or national security concern.” Although a more tepid commitment than certain other Framework Agreements, it nevertheless sets the expectation that Malaysia will at least make some effort to align on what has become a broad array of security-based tariff measures by the United States.
For the shipbuilding sector, where the United States has introduced shipping fees pursuant to Section 301 of the Trade Act of 1974 (Section 301), the Agreement contains a specific provision. Malaysia commits to adopt “similar measures of equivalent restrictive effect” as those of the United States to “encourage shipbuilding and shipping by market economy countries.” Malaysia and the United States pledge to “discuss” the measures to be deployed. Interested U.S. entities may seek to inform those discussions.
Critical minerals alignment
In the realm of critical minerals, Annex III reflects Malaysia’s commitment to “refrain from banning critical mineral exports to the United States and {to} eliminate any rare earth element export quotas to the United States.” Going further, Malaysia “agrees to encourage a supply of rare earth magnets on terms favorable to the United States, subject to mutually agreed upon arrangements.” Although not stated in the Agreement, such commitments may ultimately be paired with favorable treatment for Malaysia in any Section 232 action on imports of processed critical minerals.
Alignment on trade remedies, transshipment, and the role of SOEs
Malaysia otherwise pledges to address the activities of certain third country entities operating in or through Malaysia. First, this means “ensur{ing} a level playing field for U.S. companies in Malaysia’s market with respect to SOEs of third countries.” Second, it encompasses unfair trade practices of “companies owned or controlled by third countries” that result in the export of “below-market price goods to the United States,” “increased exports of such goods to the United States,” “a reduction in U.S. exports to Malaysia,” or “a reduction in U.S. exports to third-country markets.” In essence, this obliges Malaysia to help address problems of dumping and overcapacity tied to operations in Malaysia that may be linked to entities in, e.g., the People’s Republic of China. Third, Malaysia agrees to “adopt and effectively enforce measures to combat transshipment and other practices to evade or circumvent” U.S. tariffs and to “enter into a duty evasion cooperation agreement” with the United States. At present, however, the cooperation agreement itself does not appear among the Agreement’s annexes. Not only is this a priority for the Trump Administration and U.S. industry, but it would also appear to be a practical necessity to realize the agreement’s stated intention for its benefits to flow to the signatory countries, rather than third parties.
Forced labor enforcement
Within two years of the Agreement’s entry into force, Malaysia will adopt and implement a prohibition on the importation of goods produced by forced labor and “may acknowledge” U.S. forced labor determinations under 19 U.S.C. § 1307 and prohibit importation of goods from companies identified in such determinations. In turn, to assist Malaysia, the United States will “shar{e} best practices on the development and enforcement of forced labor import prohibitions.” Forced labor has been a recurring topic of interest in the Trump Administration’s 2025 trade policy, having featured in several Framework Agreements as well as the recent Section 301 determination regarding Nicaragua.
Export controls and sanctions policies
With respect to export controls, Malaysia promises to “align with all unilateral export controls in force by the United States and ensure that its companies do not backfill or undermine these controls.” To ensure that alignment is effective in practice, Malaysia will “support the expansion and resourcing of domestic export control reinforcement mechanisms,” strengthen penalties, and cooperate with the U.S. as appropriate. To enhance U.S. enforcement of its own export controls, Malaysia furthermore commits to “screen and share its customs and transaction data related to U.S.-origin or U.S.-controlled items to identify transactions of concern to U.S. authorities.”
As for sanctions, Malaysia will “cooperate with” the United States, consistent with Malaysian law, “with a view to restricting transactions of its nationals with individuals and entities included on” U.S. sanctions lists. Finally, Malaysia commits to “explore the establishment of” a national security review mechanism for inbound investments and otherwise “cooperate with the United States on matters related to investment security.” Critical minerals and critical infrastructure are named as sectors of particular interest, suggesting a potential backstop against Malaysia’s promised development of this sector being overtaken by geopolitical rivals of the United States. Elsewhere, Malaysia states that it will “{e}ndeavor{} to collaborate . . . to address cybersecurity challenges and matters of mutual interest.”
The United States offers some additional carrots in the realm of security alignment, promising to account for Malaysia’s cooperation in “address{ing} shared national and economic security issues” in administering U.S. export controls, investment reviews, and other measures.
Both Sides Benefit
For the United States, the agreement expands commercial opportunities for U.S. exporters in a high-growth Southeast Asian market. It secures long-term access to Malaysia’s critical-minerals and electronics supply chains, supporting U.S. industries tied to defense, semiconductors, and clean-energy technology. For Malaysia, the accord provides preferential access for yet-to-be identified product groups, while strengthening Malaysia’s position as a partner in U.S. efforts to diversify critical global supply chains. Implementation may present challenges, particularly in balancing trade commitments with domestic stakeholder considerations, but the agreement offers a pathway toward increased investment, both by and in the United States. Perhaps most importantly, for both sides the Agreement provides greater certainty with respect to the bilateral commercial landscape.
A Model for Other Agreements with Southeast Asia, With Limitations
On October 26, 2025, the United States signed separate bilateral agreements with both Malaysia and Cambodia. The main texts of those agreements are nearly identical in their structure. Many of their provisions are materially identical in substance, but meaningful distinctions reflect differences in the negotiating priorities and domestic legal system of each country. For example, whereas Article 2.7 obliges Malaysia to provide U.S. entities “any commitment concerning trade in services that Malaysia has made or hereafter makes in a trade agreement to any third country, jurisdiction or economy” (other than ASEAN or under ASEAN agreements), Article 2.6 of the Agreement with Cambodia instead provides that Cambodia “shall refrain from imposing new barriers that provide less favorable treatment to U.S. services suppliers than the treatment afforded to domestic services suppliers and services suppliers from any third country, jurisdiction, or economy.” Moreover, Annexes appended to the main text identify additional commitments or provide greater detail with respect to the commitments set forth in the main text. These Annexes differ more significantly from agreement to agreement.
Operationally, these similar-but-adjustable agreements provide a notional template for future U.S. dealmaking texts. Indeed, a relatively high degree of standardization may be a practical necessity for the United States, given how many simultaneous negotiations are underway. On the other hand, the Agreements notably omit any mention of tariffs pursuant to Section 232 of the Trade Expansion Act of 1962 (Section 232). Neither Malaysia nor Cambodia appears to have secured concessions with respect to those tariff regimes. Many other U.S. trading partners with which the United States has yet to conclude an agreement (or framework agreement) have an essential interest in adjusting the way that Section 232 tariff regimes apply to their exports.
A Possible Role for Interested Parties in Enforcement
If effectively implemented, the Agreement may anchor a model that pairs market liberalization and access to strategic resources with closer alignment on trade and investment controls. Over time, accountability and enforceability will be key questions. Malaysia has committed to simultaneous reforms in a variety of sectors. The United States will need to monitor compliance. While the Agreement contains no dispute settlement provisions, Article 7.4(2) requires good faith consultations “when practicable” to address noncompliance.
Although lacking the formal procedures as contained, for example, in the USMCA Agreement concerning the Rapid-Response Labor Mechanism, there may be a role for interested parties to contribute to compliance. From a practical standpoint, USTR is simultaneously pursuing a variety of initiatives and effective enforcement of this Agreement will require monitoring a variety of different issue areas. The more Agreements are finalized, the more countries and issue areas may require such monitoring. To ensure efficient and effective use of limited government resources, U.S. entities with an interest in Malaysia’s implementation of a given provision of the agreement should consider engaging with USTR to identify unresolved problems or compliance issues. For example, this may include transshipment, antidumping or countervailing duty circumvention, exports at below market prices driven by China-linked SOEs operating in Malaysia, steelmaking overcapacity, or labor policy issues.
Should consultations fail to yield resolution, enforcement ultimately falls to U.S. “action in accordance with applicable domestic law.” At present, that could include, e.g., the imposition of tariffs pursuant to IEEPA, Section 232, or Section 301. This would appear to create a de facto “snapback” enforcement mechanism on the U.S. side, although Section 232 and Section 301 each has more procedural requirements than IEEPA.
Tariff Strategy and Legal Insight
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