Tariff on Malaysian exports to US is reasonable, says Tengku Zafrul

The Star

6 days ago

KUALA LUMPUR: The newly imposed 19% tariff on Malaysian exports to the United States is considered reasonable and will not threaten the country's competitiveness, says Tengku Datuk Seri Zafrul Abdul Aziz.
The Investment, Trade and Industry Minister stated that although Malaysia had hoped for a lower tariff rate, the negotiations' result was fair as it was achieved without compromising the nation's core policies or sovereignty.
'Among Asean countries, Malaysian goods remain competitive in the US market. While we were hoping for a lower rate, the ministry considers this outcome reasonable, given Malaysia's offer did not jeopardise any key national policies or our sovereignty, as aspired by the rakyat,' he said in Parliament on Monday (Aug 4).
Tengku Zafrul said that the US is Malaysia's most important trading partner and top export destination, with nearly RM200bil in export value.
He then said that this is ahead of China, and is one of the main sources of foreign direct investment this year.
'That's why we cannot afford to take any changes in trade policy with the US lightly. It will have a serious and negative impact on Malaysia,' he warned.
He cited the electrical and electronics (E&E) sector as an example, saying that about 100,000 jobs, particularly in Penang and Kedah, are at risk if Malaysia cannot export these products to the US due to unfavourable trade terms.
The minister said Malaysia and the US have agreed in principle to an Agreement on Reciprocal Trade (ART), which outlines detailed commitments reached during negotiations.
Tengku Zafrul said this covers six key areas; tariffs and quotas, non-tariff barriers, digital trade and technology, rules of origin, economic and national security, and commercial considerations.
'The agreed improvements directly enhance the ease of doing business, making Malaysia more competitive and attractive as a leading investment destination in the region,' he said.
Tengku Zafrul said the government's ongoing reform efforts are already bearing fruit, as reflected in the country's improved position in the World Competitiveness Ranking.
On tariffs, Tengku Zafrul said Malaysia has agreed to reduce or eliminate import duties on 98.4% of all tariff lines for US imports.
While excise duties remain untouched, he said sales tax exemptions will apply to certain US agricultural products such as dairy and seafood.
Regarding digital trade, he said Malaysia has agreed to three key points: not to impose a discriminatory digital service tax on US companies; to drop the requirement for American cloud and social media providers to contribute 6% of revenue to the Universal Service Fund (USF); and to permanently lift the directive requiring all domain name system (DNS) traffic to be routed through local DNS services.
However, Tengku Zafrul emphasised that Malaysia rejected several US demands that risked national sovereignty.
'Cloud service providers and social media platforms remain subject to Malaysia's criminal laws. The government retains the right to request source code transfers for use in critical infrastructure, government procurement and the financial sector,' he said.
On economic and national security, Zafrul said Malaysia agreed to strengthen controls under Section 12 of the Strategic Trade Act, enforced since July 14, to address US concerns about the export and transit of artificial intelligence (AI) chips to third countries.
'Malaysia has also committed not to impose any export restrictions on rare earth elements and critical minerals to the US. But this does not grant the US exclusive rights over our supply,' he clarified.
Tengku Zafrul added that both nations are in the final stages of agreeing on a joint statement, which will be issued soon, detailing the outcomes and commitments of the negotiation.
'The government remains committed to ensuring transparency and balance, protecting both the intellectual property of companies and Malaysia's sovereignty, security and economic stability,' he said.