Malaysia–U.S. ART: Strengthening Growth and Competitiveness of Malaysian Exporters
The Agreement on Reciprocal Trade (ART) is expected to benefit Malaysia exporters by securing U.S. market access, strengthening trade stability and driving growth and innovation.
KUALA LUMPUR, 4 NOVEMBER 2025 (TUESDAY) – MATRADE welcomes the signing of the Agreement on Reciprocal Trade (ART) between Malaysia and the United States of America (USA) by YAB Prime Minister Datuk Seri Anwar Ibrahim and President Donald Trump on 26 October at the 47th Asean Summit.
The ART represents a major milestone in Malaysia’s trade relations with the United States (U.S.). The agreement has established a fair, balanced and mutually beneficial trade relations between Malaysia and the U.S following the latter’s introduction of higher tariffs on imports from countries with large trade surpluses, while ensuring continued access for Malaysian goods to one of its major export markets.
For Malaysia, the ART could enhance local industries’ efficiency, innovation and product quality while strengthening their competitiveness in the US market.
Without the agreement, 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 with worth RM56.2 billion in 2024, under the U.S. Trade Expansion Act.
Contrary to concerns that the ART could harm local businesses and Small and Medium Enterprises (SMEs), the tariff reductions covering 98.4% of U.S. goods will not significantly harm them, as Malaysia has not fully eliminated import duties. The average duty remains around 7%, with more than half of all imports already duty-free. Reductions apply only to selected U.S. goods and will be phased in over up to nine years, while products that previously faced high tariffs (up to 60%) will still retain moderate rates of 5%–15%. Additionally, U.S. goods are generally more expensive due to higher production and shipping costs, making local products more competitive for consumers.
Failure to secure the agreement could disrupt Malaysia’s key industrial sectors, such as E&E, 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.
The U.S. is Malaysia’s third-largest trading partner. It is also Malaysia’s second largest export market, after Singapore, and a key destination for E&E products, palm oil, rubber, and other manufactured goods. In 2024, Malaysia’s exports to the U.S. were valued at RM198.91 billion, and from January to September 2025, exports reached RM166.38 billion.
The agreement offers exemption from the 19% tariff for 1,711 Malaysian export product lines valued at USD5.2 billion, or roughly 12% of Malaysia’s total exports to the U.S. in 2024. These include key commodities such as palm oil and palm oil-based products, rubber goods, cocoa, and products such as aircraft components, and pharmaceuticals.
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. This more predictable trade environment has been very welcomed by the business and exporting community.
MATRADE’s US offices located in Los Angeles, Miami, and New York are well-positioned to strengthen Malaysia’s engagement in the market. The agency is looking at intensifying export promotions through strategic partnerships with industry associations and big corporations such as Amazon and Deloitte as well as through Trade & Investment Missions to the country.
The ART marks a pivotal step toward strengthening Malaysia’s position in the global marketplace by securing fair and stable access to the U.S. 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 (ESG) standards. Overall, the ART serves as a catalyst for enhancing product quality, sustainability practices and the global credibility of Malaysian exports.
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 U.S. companies, giving Malaysian firms a distinct competitive edge within ASEAN. The ART also acts as a catalyst for export upgrading and market diversification, encouraging local industries to elevate standards, invest in value-added processes and expand branded and service-oriented exports. Collectively, these developments support Malaysia’s long-term vision to move up the global value chain and enhance its role as a trusted trading partner to the U.S.
