Malaysia’s newly signed Agreement on Reciprocal Tariffs (ART) with the United States has stirred one of the most intense political debates of the year.
To its critics, it compromises Malaysia’s sovereignty and leaves the country vulnerable to Washington’s pressure. To its defenders, it’s a necessary move — a pragmatic safeguard to preserve export access and jobs in a volatile global trade climate.
As the noise swells, it’s worth untangling what the ART really is, what it is not, and how Malaysia should move forward.
The Political Firestorm
The controversy escalated when Rafizi Ramli, the Economy Minister, publicly questioned several clauses of the ART, warning that they could curtail Malaysia’s policy independence.
In response, Tengku Zafrul Aziz, Minister of Investment, Trade and Industry, released a detailed Facebook video explaining the government’s position. He described the ART as a two-way arrangement, not an act of submission, and stressed that each clause — including those seen as restrictive — contains safeguards, exceptions, and mutual conditions.
“Malaysia’s commitments are mutual, not submissive. We negotiated every clause to safeguard jobs and industries,”
— Tengku Zafrul Aziz, responding to Rafizi Ramli
Zafrul reminded that Malaysia’s semiconductor exports to the U.S. worth RM 60 billion annually were facing potential tariffs of up to 100 %. Failing to sign could have crippled one of Malaysia’s most strategic industries, threatening tens of thousands of jobs in Penang, Kedah, and Johor.
A High-Stakes Economic Gamble
The ART was negotiated under a revived Trumpian protectionist push. As the 2024 U.S. election aftermath left global markets jittery, President Trump demanded that America’s major trading partners accept new “reciprocal” deals — or face steep tariffs.
For Malaysia, a highly export-dependent economy, refusing to engage was not an option. Signing the ART buys Malaysia breathing space: its exports remain within current tariff schedules, while industries get time to adjust to Washington’s shifting trade regime.
However, beneath that pragmatism lies a subtle diplomatic dance.
A Deal to Humour Washington
Observers familiar with diplomacy and trade negotiations quietly admit that the ART also served a political purpose — to humour Trump.
Facing pressure at home to prove that his tariff policy was “working,” Trump needed new trade signings to tout as victories. Malaysia’s readiness to conclude a bilateral deal allowed the White House to claim success, even though much of the text remained subject to consultation rather than binding enforcement.
In Washington, that narrative is now faltering. The US Senate has yet to ratify the ART, citing concerns over executive overreach.
Two lower courts have since ruled that Trump’s administration exceeded its authority in unilaterally implementing tariff adjustments without congressional consent.
The matter now sits before the US Supreme Court, which will determine whether such executive trade actions are constitutional.
The win by Zohran Mandani for New York City mayor and across the nation blue flip in yesterday's state and city elections was partly attributed to public resentment on the tariff policy that affected cost of living and doing of business.
In short, the ART is politically real but legally unstable — and Malaysia was astute enough to design its participation around that reality.
Article 7: The Built-In Exit Clause
This is where Article 7 of the ART becomes crucial.
Unlike traditional free trade agreements, the ART is a government-to-government (G2G) framework built on mutual consultation rather than binding arbitration.
Under Article 7, either party — Malaysia or the U.S. — may terminate or suspend the agreement by written notice, following consultations under the Joint Committee established by the pact. Termination does not require parliamentary approval in the other country, and Malaysia’s withdrawal is governed solely by its domestic legal process.
In other words, Malaysia retains full sovereign control over whether to continue, amend, or exit the agreement. This clause was deliberately negotiated to ensure that Malaysia is not permanently locked into any commitments that later conflict with its economic or security interests.
The Attorney-General’s Chambers later confirmed this interpretation, emphasising that the ART is “non-binding beyond what Malaysia voluntarily enacts into domestic law.”
The Give-and-Take Reality
According to The Edge Weekly (Nov 3–9 issue), the trade-off looks like this:
What Malaysia gives:
- Expanded access for U.S. goods — machinery, vehicles, dairy, poultry, ethanol, and processed foods.
- Cooperation with U.S. export controls and investment screening, especially under Article 5 on national security and strategic technology.
- Commitment to prevent trans-shipment, sanctions evasion, and forced labour violations.
What Malaysia gets:
- Retention of existing U.S. tariff rates, avoiding escalation.
- Zero-tariff access for selected Malaysian exports under an “aligned partners” list.
- Preferential treatment for Malaysian semiconductors and critical-minerals exports, so long as Malaysia maintains compliance on technology security.
In essence, Malaysia gained time, stability, and market access — while embedding flexibility through Article 7.
The Sovereignty Anxiety
Still, public unease persists.
The Star (Oct 28: “US Trade Deal Brings Certainty and Strain”) noted that while the deal offers short-term assurance, it could impose long-term limits.
Its Oct 29 analysis (“Trump’s Trade Deals Give US Edge over S-E Asia”) described the ART model as a geopolitical tool for Washington to secure leverage over regional economies.
On Nov 3, The Star again cautioned that key provisions — especially those invoking “national security” — remain open to broad interpretation, potentially forcing Malaysia to align future trade policy with U.S. interests.
Such fears are not misplaced, but they overlook Malaysia’s built-in safeguards — particularly Article 7 and the consultation-based nature of the ART. Malaysia can opt out if the US weaponises the deal politically.
Moving from Politics to Preparation
Malaysia’s real task begins now: to manage the ART on its own terms. Three priorities stand out:
1️⃣ Institutional Safeguards
Ensure every ART obligation is implemented through transparent, Malaysia-specific regulations. Parliament, MITI, and MIDA must coordinate to prevent overreach and protect domestic discretion.
2️⃣ Industrial Upgrading
The tariff reprieve must translate into innovation. Malaysia should leverage U.S. partnerships to move up the technology value chain, focusing on design, R&D, and digital infrastructure — not just assembly.
3️⃣ Strategic Autonomy
Malaysia should continue diversifying trade links across ASEAN, China, the EU, and the Middle East. A broad diplomatic portfolio is the best defence against over-dependence on any one superpower.
Looking Ahead
The ART is not the end of Malaysia’s sovereignty, nor a surrender to US interests.
It is a temporary, flexible arrangement designed to protect national industries while navigating a turbulent global trade environment — and to politely satisfy a Washington administration desperate to show a “win.”
With Article 7 giving Malaysia the legal right to walk away, and the deal’s future in the U.S. still tied up in court, Malaysia holds more leverage than its critics assume.
Handled wisely, the ART can serve as a strategic bridge, not a trap — a means to buy time, preserve stability, and position Malaysia for higher-value growth in an increasingly politicised global economy.
Note: This blog posting is assisted by Chat GPT after several prompts, much research and information gatherings, and repeated addition, deletion and modifications.
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