KUALA LUMPUR – Malaysia signed a new trade agreement with the United States on Sunday, securing a revised 19 per cent tariff rate as part of a broader pact that also deepens cooperation on critical minerals and rare earths. The deal was formalised on the sidelines of the 47th ASEAN Summit in Kuala Lumpur, with U.S. President Donald Trump in attendance. The agreement marks a milestone in Malaysia–U.S. trade relations and grants Kuala Lumpur expanded access to American markets while committing both nations to safeguard the resilience of high-tech supply chains.
U.S. Trade Representative Jamieson Greer said the pact “ensures that trade investment in critical minerals between both sides can be as free and resilient as possible,” underscoring the minerals’ strategic importance to manufacturing and technology industries. The 19 per cent tariff replaces the earlier 25 per cent rate proposed in August and does not affect roughly 60 per cent of Malaysia’s RM200 billion (US$61.6 billion) in exports to the U.S., including semiconductors and pharmaceuticals, which remain zero-rated .
A joint statement described the deal as an “agreement on reciprocal trade”, confirming that Malaysia had made concessions on issues such as recognition of American halal certification and the export of rare earths, materials vital for electric vehicles, defence technology and renewable energy projects. Under the memorandum of understanding, Malaysia pledged not to ban or impose quotas on exports of critical minerals to the U.S. and to ensure the unrestricted sale of rare earth magnets to American firms.
The country also committed to accelerating development of its critical mineral sector through joint ventures with U.S. companies and extending operational licences to provide business certainty for investors. Malaysia possesses over 16 million tonnes of rare earth deposits valued at roughly RM1 trillion (US$211 billion), accounting for about 13 per cent of global supply. Most of its ore is currently exported to China for processing.
At a press conference, Investment, Trade and Industry Minister Tengku Zafrul Aziz said the deal provides “better access to the U.S. market than before,” particularly benefiting exporters in electronics, semiconductors, machinery, pharmaceuticals, and aerospace. He added that Malaysia had won zero-tariff access on 1,711 tariff lines, covering 12 per cent of exports worth US$5.2 billion.
Malaysia will also receive preferential treatment for semiconductor exports under Section 232 of the U.S. Trade Expansion Act, which permits the U.S. president to negotiate with partners on goods linked to national security. Data from the Office of the U.S. Trade Representative shows Malaysia logged a US$24.8 billion goods trade surplus with the U.S. in 2024, when America was also the country’s largest foreign investor.
However, elements of the deal sparked debate over Malaysia’s regulatory autonomy. A chapter on digital trade compels Malaysia to consult Washington before signing similar agreements with other nations that could affect U.S. strategic interests. Washington has made critical minerals a pillar of its national security policy in light of China’s dominance in rare earth refining, a focal point of the continuing U.S.–China trade confrontation.
Since trade talks began in April, Malaysia has ramped up its imports of American gas and imposed tighter restrictions on the movement of artificial intelligence chips to prevent Chinese circumvention of export curbs. Even as Malaysia opens its economy further to U.S. trade, Prime Minister Anwar Ibrahim insisted certain domestic policies will remain untouched. He stressed that long-standing Bumiputera equity quotas, which safeguard the economic interests of the Malay majority and indigenous peoples, were a “red line” in negotiations.