Malaysia’s new trade deal with the US keeps duty-free access for key sectors that make up about 12% of exports to the US, helping safeguard industries from rising US protectionism, the Federation of Malaysian Manufacturing (FMM) said.
Under the deal, the US keeps a 19% tariff on Malaysian goods but 1,711 product lines will either be fully exempted or have lower tariffs. The full list will be confirmed once both governments complete the legal ratification process, Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said at a press conference on Sunday.
The Sept 5 Executive Order on Potential Tariff Adjustments gives zero tariffs to palm oil, rubber, cocoa, aircraft parts and pharmaceuticals, worth about US$5.2 billion (RM21.91 billion) of Malaysia’s exports to the US.
“Without this agreement, Malaysia would have been exposed to a wave of new US tariff measures announced in recent months,” said FMM president Tan Sri Soh Thian Lai in a statement.
He cited the example of the US’ proposed 100% tariffs on semiconductor imports from firms that do not move production to America, 50% tariffs on kitchen cabinets and bathroom products, and 30% tariffs on upholstered furniture.
“The reciprocal trade agreement protects Malaysian exporters from being caught in these sweeping actions and ensures continued access to the US market under stable and predictable conditions,” Soh added.
FMM said the agreement ensures predictable trade conditions and protects Malaysian exporters from broad tariff actions as the US moves to reshore manufacturing.
The agreement will take effect once enforced but Malaysia’s tariff cuts and related commitments will be rolled out gradually over several years.
FMM said this phased approach covers all product categories and includes excise, sales and service taxes, and technical and pharmaceutical standards. It gives industries and regulators time to upgrade systems, adapt to new rules and improve efficiency while aligning with international standards.
“The framework also provides clarity and stability for investors, encouraging collaboration between Malaysian and US firms in high-value manufacturing and digital sectors,” said Soh.
“The bottom line is that the agreement gives Malaysia’s manufacturing sector breathing space, continuity of market access and a stronger foundation for investment. The challenge now is to turn these terms into concrete results,” Soh noted.
Soh also added that the industry and government must work together to accelerate capacity building, move up the value chain and fully leverage the exemption and implementation package to enhance Malaysia’s competitive position.
US zero-tariff list under Executive Order
The White House said products listed in Annex III of Executive Order 14346 (Sept 5, 2025) will get 0% reciprocal tariffs. This applies to Malaysia and other aligned US trading partners.
The list includes:
- Palm oil (crude and refined) and palm kernel/babassu oil (not chemically modified)
- Cocoa (beans, paste, butter, powder)
- Natural rubber (latex, smoked sheets, technically specified natural rubber) – finished goods like gloves and tyres are excluded
- Aircraft components (heat pumps, filters, catalytic converters, hoists, winches, hydraulic jacks)
Malaysia has been the US’s third-largest trading partner since 2015. In Jan-Sept 2025, electrical and electronic (E&E) products were the largest exports (61.5%), followed by optical/scientific equipment (5.3%), machinery and parts (4.8%), and rubber products (3.5%). Other exports include wood, metals, processed food, iron and steel, palm oil and chemicals.
Trade with the US rose 29.9% in 2024 to RM324.91 billion, with exports hitting a record RM198.65 billion, led by E&E products, machinery and rubber. Imports from the US also grew 42.1% to RM126.26 billion, mainly in E&E, machinery and chemicals.
Source: theedgemalaysia