Malaysia pledges over US$240 billion in US deals to avert trade fallout and to lower tariffs

Business Times

7 hours ago

[KUALA LUMPUR] In a bid to secure a lower tariff rate, Malaysia has committed to trade agreements with the United States, with deals cumulatively valued at over US$240 billion for the purchase of items such as Boeing aircraft, coal and telecommunications equipment.
In a special ministerial statement in Parliament on Monday (Aug 4), Minister of Investment, Trade and Industry Tengku Zafrul Aziz said that this strategy is intended to narrow the trade deficit between Malaysia and the US, and to reduce the impact of American tariffs.
Under the new tariff structure announced by Washington on Jul 31, Malaysia faces a lower tariff rate of 19 per cent, down from the initial 25 per cent proposed under the US' retaliatory trade measures.
Malaysia's tariff now matches the rates imposed on Thailand, Indonesia, Cambodia and the Philippines. The rate is lower than Vietnam's 20 per cent and Brunei's 25 per cent, but higher than Singapore's 10 per cent. Laos and Myanmar face the highest rate among Asean countries, at 40 per cent.
Tengku Zafrul said: 'The United States encourages Malaysia to procure from and invest in America under Section 6 of the agreement, to address the bilateral trade imbalance.'
In 2024, the US was Malaysia's largest export destination, with shipments worth nearly RM198.7 billion (S$60.4 billion), and among its top sources of foreign direct investment, totalling RM32.8 billion.
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Tengku Zafrul noted that the shifts in US trade policy pose real risks: Up to 100,000 jobs, mainly in Penang and Kedah, could be lost if electrical and electronic exports to the US are disrupted as a result of the tariffs.
Although semiconductors are currently exempt from US retaliatory tariffs , they remain under investigation under Section 232 of the US Trade Expansion Act of 1962, which permits tariffs on national security grounds, he said.
'We must stay vigilant and ready for any potential tariff expansion affecting the semiconductor industry,' he added.
What are the deals?
The commitments between Malaysia and the US span several key sectors, including technology and semiconductors, energy, aviation and telecommunications.
The trade deals include a US$150 billion commitment over five years by multinational corporations in Malaysia to procure goods such as semiconductors, data centres and aircraft.
Government-linked company Telekom Malaysia, for example, will purchase US$119 million in telecommunications equipment.
Further commitments include US$70 billion in cross-border Malaysian investments in the US over 10 years, along with annual purchases of US$42.6 million in coal by state-owned energy company Tenaga Nasional, and US$3.4 billion in liquefied natural gas by national oil producer Petronas.
The deals also include a US$19 billion purchase of Boeing aircraft by Malaysia Aviation Group (MAG).
Malaysia has also agreed to reduce or eliminate duties on 98.4 per cent of imports from the US, ease certain non-tariff barriers, and remove the requirement for US social media platforms and cloud-service providers to contribute a portion of their Malaysian revenues to a government fund.
Boeing deal not tariff-driven
Tengku Zafrul, referring to the purchase of aircraft, stressed that the Boeing jets ordered by MAG were not a response to tariff pressure, but part of a long-term fleet renewal strategy . The airline is replacing its ageing B737-800 aircraft, which have been in service for an average of 14 years.
In 2016, MAG ordered 25 Boeing 737-8 MAX aircraft. Thirteen had been delivered as of November 2023, with the rest arriving in phases until 2027.
The company placed an additional order for 30 Boeing 737 MAX aircraft on Mar 20, before the reciprocal tariffs were announced, scheduled to be delivered between 2025 and 2035. Another 30 aircraft remain under consideration, pending MAG's future growth strategy, he added.
'The total procurement value includes aircraft, engines, training, maintenance and long-term operational support,' said Tengku Zafrul, adding that Malaysia's aerospace sector contributed RM25.1 billion to the country's gross domestic product in 2024 and supported 30,000 jobs.