Written by Fatin Ismail
On 26 October 2025, an Agreement Between the United States and Malaysia on Reciprocal Trade (‘the Trade Agreement’) was entered into. The Trade Agreement is aimed at establishing a clear and predictable framework for reciprocal trade. It establishes a comprehensive framework aimed at enhancing bilateral economic ties, strengthening supply chain resilience, and aligning both countries’ trade and national-security interests and is composed of seven key sections and multiple operative articles, each setting specific reciprocal commitments:
The Parties commit to tariff reciprocity and transparent market access:
Tariffs (Art 1.1):
Malaysia applies negotiated customs duties on U.S. originating goods, while the United States implements reciprocal revised tariff rates on Malaysian originating goods.
Quantitative Restrictions (Art 1.2):
Malaysia may not impose quantitative restrictions on U.S. goods except as permitted under WTO rules.
A broad suite of market-access reforms increases regulatory transparency and levels the playing field:
Import Licensing (Art. 2.1):
Licensing processes must remain transparent, non-discriminatory, and not restrict market access for U.S. products.
Technical Regulations, Standards & Conformity Assessment (Art. 2.2):
Malaysia must accept U.S. standards and conformity assessments where applicable, reducing duplicative testing.
Agriculture (Art. 2.3):
SPS measures must be science-based and must not impose disguised restrictions on U.S. agricultural exports.
Geographical Indications (Art. 2.4):
GI protections must be fair and limited to terms genuinely tied to geographic origin.
Cheese & Meat Terms (Art. 2.5):
Common food names listed in Annex II cannot be used to block U.S. product access.
Intellectual Property (Art. 2.6):
Malaysia strengthens IP enforcement, including criminal and border measures targeting counterfeit and pirated goods.
Services (Art. 2.7):
Most-favoured services commitments granted to other partners must also extend to the United States (with limited ASEAN carve-outs).
Good Regulatory Practices (Art. 2.8):
Malaysia adopts better rule-making transparency and stakeholder engagement.
Labor (Art. 2.9):
Forced-labour import bans and internationally recognized labor rights must be implemented and enforced.
Environment (Art. 2.10):
Malaysia must uphold environmental protections relevant to reciprocal trade.
Customs & Trade Facilitation (Art. 2.11):
Commitments to paperless trade and digital customs systems.
Border Measures & Taxes (Art. 2.12):
Alignment on future U.S. border measures and prohibition of discriminatory VAT treatment toward U.S. businesses.
Commitments that support innovation-driven commerce:
Digital Services Tax (Art. 3.1):
No discriminatory digital-services tax.
Facilitation of Digital Trade (Art. 3.2):
Unrestricted, secure cross-border data flows and nondiscriminatory treatment of digital services.
Digital Trade Agreements (Art. 3.3):
Consultation with the U.S. before concluding conflicting digital trade agreements with third countries.
Market Entry Conditions (Art. 3.4):
No forced technology transfer or source-code disclosure as a condition for market access
Customs Duties on Electronic Transmissions (Art. 3.5):
No customs duties on electronic transmissions
The Parties reserve rights to tighten origin rules if benefits flow disproportionately to third countries, ensuring preferential treatment remains bilateral.
A strategically significant chapter focused on alignment against harmful global trade practices:
Complementary actions (Art. 5.1):
Malaysia aligns trade restrictions with U.S. national-security measures where justified.
Export Controls & Sanctions Cooperation (Art. 5.2):
Malaysia aligns with U.S. export controls and sanctions frameworks and strengthens inbound investment screening.
Other Cooperation (Art. 5.3):
Anti-duty-evasion measures, defense-trade cooperation, and safeguards against agreements that threaten core U.S. interests.
Market-opening actions and investment facilitation:
Investment (Art. 6.1):
Facilitation of U.S. investment in key Malaysian sectors and Malaysian investment expansion in the U.S.
State-Owned Enterprises (Art. 6.2):
SOEs must act commercially and avoid discriminatory practices; subsidy transparency obligations apply.
Purchases (Art. 6.3):
Malaysia intends to increase procurement and purchases of U.S. products as set out in Annex IV.
Recognition of Existing Rights and Obligations (Art. 7.1):
Rights and obligations under current WTO agreements are preserved.
Entry into Force (Art. 7.2):
Entry into force within 60 days of domestic ratification.
Mechanisms for amendments (Art. 7.3):
Either Party may request modifications to the Agreement.
Amendments must be mutually agreed in writing and take effect 60 days after each Party confirms completion of its legal procedures, unless otherwise arranged.
Enforcement (Art. 7.4):
Each Party’s sovereign right to impose additional tariffs when necessary to address unfair trade practices, sudden import surges, or economic and national security concerns, so long as such measures align with domestic law. allows a Party to take action if it believes the other Party has failed to meet its obligations under the Agreement.
Termination (Art. 7.5):
Termination by written notification to the other party and will take effect 180 days after date of notification.
Annexes, Appendices, and Footnotes (Art. 7.6):
The annexes, appendices, and footnotes to this Agreement constitute an integral part of this Agreement.
Conclusion
This trade agreement marks a milestone in trade relations between United States and Malaysia. By locking in enhanced access and a clearer tariff structure on both sides, the agreement lays a foundation for deeper commercial engagement and regulatory alignment. Legal and advisory services that position early for compliance, market access strategy and risk mitigation stand to deliver significant value to clients operating across this corridor.
For the full Trade Agreement, click here.
Published on 28 October 2025