PETALING JAYA: Malaysia is unlikely to be immediately affected by the United States’ threats to slap additional 25% tariffs on countries trading with Iran, but Putrajaya is still bound to align with the Agreement on Reciprocal Trade (ART) that it signed last year.
Economist Geoffrey Williams said Malaysia’s total trade with Iran was valued at RM2.6bil in 2024, up 24.6% from the previous year, with exports largely consisting of palm oil and imports mainly Iranian oil and gas products.
“Iran is a mid-level trading partner for Malaysia. There have already been concerns about Malaysia’s involvement in trade with Iran, especially given existing oil embargoes,” he said.
Williams noted that the proposed 25% tariff could affect Malaysia if it is applied broadly to all products entering the US from countries trading with Iran.
“If such a tariff is enforced across the board, it would have an effect on Malaysia’s trade.
“Malaysia’s commitments under international trade arrangements could also complicate matters,” he said.
“ART binds Malaysia to align with US trade embargoes if there is a mutual concern. So this can become an issue.”
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia’s direct exposure to Iran is extremely small when viewed against the country’s overall trade.
“Total trade between Malaysia and Iran stood at RM2.4bil in the first 11 months of 2025.
This is only about 0.1% of Malaysia’s total trade of RM2.8 trillion,” he said, noting that the ratio has remained largely unchanged since 2019.
Despite this, Dr Afzanizam cautioned that the broader impact could still be significant because the US remains Malaysia’s major trading partner.
“The impact is not so much about Iran, but about our relationship with the United States,” he said.
On whether Trump’s statement could affect Malaysia’s dealings with Iran, Dr Afzanizam said any response would likely be handled diplomatically.
“I suppose the Malaysian government will always opt for a diplomatic solution, which means there will be ongoing negotiations with the US counterpart.”
Meanwhile, maritime industry expert and scholar Nazery Khalid said the US’ announcement could be a blessing in disguise to tackle ship-to-ship (STS) transfer of oil in its waters.
According to Nazery, Malaysia has been reported by authoritative oil industry sources as transit points of sanctioned oil imported from Iran to China.
“Given that international sanctions have been imposed in Iran, I do not think any of our ports could host tankers carrying Iranian oil.
“But, it is an open secret that STS transfer activities have been carried out in Malaysian waters involving Iranian oil that eventually ends up in China.”
Nazery said Malaysia is legally and duty-bound to adhere to international rules, as it is a member of the United Nations and signatory to the United Nations Convention on the Law of the Sea.
Nazery said Malaysia-Iran bilateral trade has been growing annually and the latest announcement by the US could disrupt certain industries trading with the Islamic Republic.
“These include lower exports of palm oil to Iran, fewer tankers carrying Iranian oil in our waters and disruption in the trade of other commodities and manufactured goods with Iran.
“This would certainly have negative repercussions to our ports, logistics service providers and industries as well as companies doing business with Iran,” he said.
US Treasury Undersecretary for Terrorism and Financial Intelligence Brian Nelson said in May last year that Washington had been closely monitoring STS transfers in Malaysian waters, particularly those suspected to be linked with sanctioned Iranian entities.
Putrajaya has denied accusations of enabling STS transfers, and in July last year, Foreign Minister Datuk Seri Mohamad Hasan announced vessels that are caught illegally transferring oil will be slapped with fines and the ships will be impounded.
At the same time, Nazery said the newly launched Maharani Freeport in Muar, Johor, would not be significantly affected by the US’ announcement given the ongoing sanctions on Iranian oil.
“The Maharani Freeport is established to tap into oil tankers from countries in the Middle East such as Saudi Arabia and the United Arab Emirates (UAE) from which we import crude oil.
“Given the international sanctions on Iran, I do not think any of our ports could host tankers carrying Iranian oil.”
Nusantara Academy for Strategic Research senior fellow Dr Azmi Hassan said the ongoing sanctions involving Iran is a bilateral matter involving the US and the Islamic republic.
“By right, we should have nothing to do with that (the US and Iran issue),” added Azmi, who is a geo-political expert.
But, Azmi warned that any additional 25% tariffs could be catastrophic for Malaysian exports to the US.
“Because, Malaysia already has an existing 19% tariff rate for exports to the US,” he added.
Azmi also said Malaysia is not the only country in the world trading with Iran; countries in Europe and Asia enjoy economic ties with the Islamic Republic.
“So, the US has to be very clear on what they meant by tariffs for countries trading with Iran.”
On Monday, US President Donald Trump said any country that trades with Iran will face an additional tariff rate of 25%.
A massive uprising has broken out in Iran following the collapse of the Iranian rial in December last year, which saw inflation soar and the prices of basic staples become unaffordable.
