Malaysia sees reducing US’ proposed tariff to 10% as a good outcome

KUALA LUMPUR – The US reducing its proposed tariffs on Malaysia to a 10 per cent baseline would be seen as a positive move, said Investment, Trade and Industry Minister Tengku Zafrul Aziz, conceding that a previously hoped for duty of zero may not be possible.

“To be fair, and the US has also been public about this, that the 10 per cent is not negotiable – it seems to be the floor,” he said in an interview with Bloomberg TV on May 27 on the sidelines of a regional summit in Kuala Lumpur.

He added that “anything that can go below 24 per cent, or at least 10 per cent”, which is the minimum duty proposed by US President Donald Trump in May, “would be good for our industries and for our exporters”. 

Malaysia had previously been in

talks with Washington on reducing the tariffs

.

In return, the Trump administration wants Malaysia to address trade imbalances and non-tariff barriers, and safeguard US technology from being channelled to other parties and investments.

South-east Asian countries would be among the hardest hit by Mr Trump’s tariffs, with rates as high as 49 per cent.

Officials from several countries in the region are working on deals to avert the higher duties, which

have been put on hold for 90 days

.

The US ran a goods trade deficit with Malaysia that hit US$24.8 billion (S$31.9 billion) in 2024, according to data from the Office of the US Trade Representative.

Malaysian negotiators are set to return to the table next week, Datuk Seri Zafrul said. 

“What’s important for us is to try and come to a win-win solution,” he said, adding that the US is Malaysia’s largest export market and its largest investor.

South-east Asian leaders began two days of talks on May 26 as they sought to deepen ties with China and Gulf nations and mitigate the fallout from any tariffs.

Malaysia, for its part, launched negotiations for a free trade agreement with the Gulf Cooperation Council.

At the same time, Malaysia is

imposing stricter rules to address the issue of possible trans-shipment

of sensitive materials through its entry and exit points to countries barred from receiving the goods.

The Investment, Trade and Industry Ministry announced in May that it will be the sole issuer of all non-preferential certificates of origin for shipment to the US, effective May 6.

Trump officials in 2025 pressured Malaysian authorities to crack down on what Washington said was semiconductor trans-shipment to China.

“The process so far has been quite smooth,” Mr Zafrul said in the interview, adding that the issue would not impact trade to Malaysia. “We have increased the capacity (and) resources to ensure that we do not have bottlenecks for the exporters to export to the US.” BLOOMBERG