The New US 19% Tariff on Malaysia: What Does it Mean?

Only 61% of goods exported to the United States by Malaysia incur the 19% tariff. Most of Malaysia’s exports to the United States are largely not affected. Malaysia’s palm oil, rubber and latex gloves, semiconductors, agricultural commodities like rubber and cocoa, and pharmaceuticals are exempt from the 19% tariff. 

From this point of view Malaysia got of lightly. With product categories such as furniture, Malaysia still has the same relative advantage as it did before the tariffs because competitor exports face the same 19% tariff.

 

 

However, Malaysia has now committed USD 240 billion in commercial transactions over the next five years including USD 150 billion in the purchase of US manufactured equipment, USD 19 billion in Boeing aircraft, USD 3.4 billion purchases in LNG, and USD 70 billion investment in the US economy. In addition, Malaysia must eliminate tariffs on US goods on 98.4% of goods coming into Malaysia from the United States. 

This is an RM 850 billion commitment to the United States, which is just as large as the forecast spending of the 13^th Malaysian plan. Most of the money committed to the US will be by GLCs and not the private sector.  And that means the Government. 

The public may have been falsely assured that the government had not crossed any red lines during the trade negotiations. Trump has undoubtedly demanded the proverbial pound of flesh before agreeing to any tariff reduction. It is lobsided in America’s favour. The worst part of the trade negotiations leading up to the tariff reduction was the disingenuous claim that the government had emerged unscathed. 

We have capitulated to American imperialism. Is this the “Pangkor Treaty of the 21^st century”. There will be growing public outcry when taxes rise to meet the new expenditures and sectors are decimated by American imports. 

Malaysia’s fiscal freedom has been hijacked and, in the end, the people will have to pay for all of this. There is going to be a lot of pressure on the government to increase taxes over the next few years. 

References:

The new US 19% tariff only applies to 61% of Malaysian exports to the United States, Murray Hunter, 8 August 2025

 

A tariff deal wrapped in deception: Malaysia’s costly compromise with the US, P Ramasamy, 6 August 2025