Malaysia And US Tariffs: Can $45B Investments and Tech Safeguards Seal the Deal?
Malaysia negotiates to eliminate U.S. 24% tariffs, addressing trade deficit, non-tariff barriers, technology safeguards, and boosting U.S. investments.
The U.S. has outlined four demands for Malaysia to secure reductions or elimination of the 24% reciprocal tariffs imposed on Malaysian goods, as announced by President Donald Trump on April 2, 2025, effective April 9, 2025 (with a 10% baseline tariff from April 5). These demands, detailed by Malaysia’s Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz, aim for a “win-win” reciprocal agreement. Malaysia’s objective is to completely eliminate these tariffs through negotiations. Below are the demands and Malaysia’s efforts to address them, based on Zafrul’s statements:
US Tariffs
Reduce the U.S.-Malaysia Trade Deficit:
Demand: The U.S. cites a $25 billion (RM105.25 billion) trade deficit with Malaysia in 2024, driven by $52.5 billion in imports from Malaysia versus $27.7 billion in exports to Malaysia.
Malaysia is open to negotiating ways to narrow this deficit, exploring alternative approaches to ensure mutually beneficial trade flows. The deficit has narrowed by 7.6% from 2023, indicating a more balanced relationship, and Malaysia aims to address U.S. concerns without retaliatory tariffs.
Address Non-Tariff Barriers (NTBs):
Demand: The U.S. seeks removal or reduction of NTBs, such as lengthy processes for certifications (e.g., halal certification delays), high excise taxes on alcoholic beverages and motor vehicles, and restrictive import policies, which the U.S. claims equate to a 47% effective tariff on its goods.
There are issues like the halal certification process and indicated Malaysia’s willingness to discuss streamlining such barriers.
Strengthen Technology Safeguards:
Demand: The U.S. wants Malaysia to prevent its technology, particularly semiconductors, from being shipped or smuggled to countries the U.S. disapproves of, emphasizing export controls on chips.
Malaysia is exploring a Technology Safeguards Agreement with the U.S. to facilitate high-tech cooperation in semiconductors, aerospace, and digital sectors. Zafrul emphasized alignment with U.S. export control priorities, ensuring Malaysian policies prevent unauthorized technology transfers.
Increase Investments in U.S.-Approved Industries:
Demand: The U.S. requests Malaysia invest in American industries it prioritizes to support its economic goals.
Malaysia has significant existing investments, with Malaysian government-linked companies and investment firms having invested $45 billion (RM189.4 billion) in U.S. bond and equity markets. Perhaps Malaysia is open to further investments in U.S.-approved sectors, aligning with mutual economic interests.
Additional Context and Actions:
Negotiation Strategy: Zafrul described recent talks with U.S. officials, including Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer, as a “step in the right direction.” Malaysia is using the 90-day tariff pause to urgently follow up on these issues, aiming for zero tariffs. MITI is also exploring a bilateral trade agreement to formalize trade terms.
Economic Context: Malaysia’s record trade surplus in March 2025 (RM24.72 billion, up 94.4%) was likely due to companies adjusting inventories before tariffs, deeming it unsustainable. This underscores the urgency of resolving tariff issues to maintain export competitiveness.
Regional Leadership: As ASEAN chair in 2025, Malaysia is leading efforts for a unified ASEAN response, advocating for a special ASEAN-U.S. summit to address trade concerns collectively.
Tech Safeguards
Malaysia is actively addressing the U.S.’s four demands through high-level negotiations, policy reviews, and investment commitments. By focusing on reducing the trade deficit, easing NTBs, ensuring technology safeguards, and boosting U.S. investments, Malaysia aims to eliminate the 24% tariffs entirely. Zafrul’s emphasis on non-retaliation and constructive engagement, supported by existing investments and ASEAN leadership, positions Malaysia to seek a fair, reciprocal trade agreement.