KUALA LUMPUR – Malaysia’s Ministry of Investment, Trade and Industry (MITI) is currently undertaking a cost-benefit analysis of the proposed United States-Malaysia Agreement on Reciprocal Trade (ART), with the findings set to inform Putrajaya’s final decision on ratification. The move signals a cautious approach by the Malaysian government as it weighs the potential implications of the trade agreement, signed last year during President Donald Trump’s visit to the region.
Minister Datuk Seri Johari Abdul Ghani reiterated that the agreement has not yet come into force, emphasizing that the ongoing analysis is crucial to understanding its potential impact. In a parliamentary written reply dated , he stated that the ministry is examining the implications of implementing the agreement. “At present, the Ministry is conducting a cost–benefit analysis of the agreement to examine the implications of its potential implementation,” he said.
The government’s commitment to safeguarding national interests remains paramount, Ghani added. Putrajaya will carefully consider the analysis’s findings before deciding whether to formally ratify the agreement. “The government remains committed to safeguarding national interests and ensuring that any implementation of the agreement does not affect existing policy directions or Malaysia’s economic security,” he affirmed.
The ART was initially signed during the 47th ASEAN Summit and Related Summits in Kuala Lumpur in October of last year, marking a potential shift in US trade policy towards Southeast Asia. However, the subsequent imposition of broader tariffs by the Trump administration, initially at 10 percent and later raised to 15 percent following a Supreme Court ruling regarding the use of emergency trade powers, has introduced a layer of uncertainty. This broader context underscores the need for Malaysia to thoroughly assess the potential benefits and risks of the ART.
The timing of this cost-benefit analysis comes as the Malaysian government awaits a detailed briefing from MITI regarding the new US tariffs, as confirmed by Prime Minister Datuk Seri Anwar Ibrahim on . Anwar indicated that the matter would be discussed further at the upcoming Cabinet meeting on Friday, and that clarifications from the ministry are expected prior to the discussion. This suggests a coordinated government response is being formulated, taking into account both the ART and the wider tariff landscape.
The United States remains a significant trading partner for Malaysia, representing the country’s third-largest trading partner with total trade reaching approximately RM367 billion in 2025. This substantial economic relationship underscores the importance of navigating the current trade uncertainties carefully. MITI is currently coordinating with officials in Washington, D.C., and with Malaysia’s ASEAN counterparts to determine the most appropriate response to the evolving situation.
Earlier analysis by MITI, conducted in May 2025, highlighted potential risks should negotiations with Washington fail to yield favorable outcomes. These included the possibility of investors divesting from Malaysia and relocating to less exposed countries, disruption to supply chains, cost inflation, and order cancellations, particularly within the electrical and electronics, electronics manufacturing services, and automotive spare parts sectors. The initial impact assessment also anticipated potential job losses for companies heavily reliant on the US market, with spillover effects on logistics and related services.
The government’s cautious stance reflects a broader concern among regional economies regarding the potential impact of US trade policies. The Agreement on Reciprocal Trade, if ratified, could offer Malaysia a degree of preferential access to the US market, potentially mitigating some of the negative effects of broader tariffs. However, the cost-benefit analysis is intended to provide a comprehensive understanding of the agreement’s implications, ensuring that it aligns with Malaysia’s long-term economic interests.
The publication of the official document on the US-Malaysia Agreement on Reciprocal Trade and a corresponding FAQ on MITI’s website in November 2025 was a step towards greater transparency, allowing the public to scrutinize the details of the agreement. However, the current cost-benefit analysis represents a more in-depth evaluation of its potential consequences, taking into account the changing geopolitical and economic landscape.
As Putrajaya awaits the detailed briefing from MITI and prepares for the Cabinet meeting, the future of the US-Malaysia trade relationship remains uncertain. The government’s commitment to a thorough assessment underscores its determination to protect national interests and ensure that any trade agreement contributes to Malaysia’s sustainable economic development.
