Matrade said the tariff reductions covering 98.4% of US goods will not significantly affect them, as Malaysia has not fully eliminated import duties.
PETALING JAYA: Without the agreement on reciprocal trade (ART) between Malaysia and the United States, Malaysian products could face steep reciprocal tariffs ranging from 24% to 50% or higher, with no exemptions, including on critical exports such as semiconductors and pharmaceuticals worth RM56.2bil in 2024, under the US Trade Expansion Act, says the Malaysia External Trade Development Corp (Matrade).
In a statement, the national trade promotional arm under the Investment, Trade and Industry Ministry said it “welcomes” ART, noting that it establishes “fair, balanced and mutually beneficial trade relations” between the two nations.
Contrary to concerns that the ART could harm local businesses and small and medium enterprises (SMEs), Matrade said the tariff reductions covering 98.4% of US goods will not significantly affect them, as Malaysia has not fully eliminated import duties.
“The average (import) duty (on US goods) remains around 7%, with more than half of all imports already duty-free,” it said.
It added that reductions apply only to selected US goods and will be phased in over up to nine years, while products that previously faced high tariffs of up to 60% will still retain “moderate rates of between 5% and 15%.
Matrade added that US goods are generally more expensive due to higher production and shipping costs, which helps maintain the competitiveness of local products in the domestic market.
“Failure to secure the agreement could disrupt Malaysia’s key industrial sectors, such as electrical and electronics, aerospace, rubber, cocoa, and pharmaceuticals, in addition to threatening millions of jobs, thousands of SMEs, and overall economic continuity which then can potentially leading to closures and loss of income across affected industries,” it noted.
The agency added that the agreement also sees exemption from the 19% tariff for 1,711 Malaysian export product lines such as palm oil and palm oil-based products, rubber goods, cocoa, and products such as aircraft components, and pharmaceuticals valued at US$5.2bil, or roughly 12% of Malaysia’s total exports to the United States in 2024.
Matrade said the ART provides certainty in the form of a lower reciprocal tariff of 19%, down from the previously proposed 25%.
“This enables enhanced pricing competitiveness, and a stabilised cost structure for exporters, which paves the way for higher exports, particularly in sectors exempted from the reciprocal tariff,” it said.
The agency added that the more predictable trade environment under ART has been well received by the business and exporting community.
Matrade said the ART marks a pivotal step toward strengthening Malaysia’s position in the global marketplace by securing fair and stable access to the US market.
“By ensuring trade stability, the agreement not only safeguards local industries and jobs but also encourages Malaysian exporters to become more competitive and innovative, aligning with international expectations in areas such as environmental, social and governance standards,” it said.
Overall, Matrade said the ART serves as a catalyst for enhancing product quality, sustainability practices and the global credibility of Malaysian exports.
Matrade added that beyond tariff relief, the agreement strengthens regulatory certainty and supply-chain resilience through deeper cooperation in trade facilitation.
“This reinforces Malaysia’s reputation as a reliable production and sourcing hub for US companies, giving Malaysian firms a distinct competitive edge within Asean,” it said.
