Malaysia Defends Reciprocal Trade Agreement with US Amid Sovereignty Concerns

The Malaysian government has moved to aggressively defend the newly signed Reciprocal Trade Agreement (hereinafter: RTA) with the United States of America (hereinafter: the USA). The agreement, formalised on 26 October 2025, has drawn severe criticism from political opponents and former Prime Ministers who argue that its provisions risk sacrificing Malaysia’s economic and political independence to satisfy the geopolitical agenda of the USA.

The Investment, Trade and Industry Minister, Tengku Zafrul Abdul Aziz, has mounted a spirited defence, arguing in Parliament on 29 October 2025 that the government was operating within the confines of a challenging geopolitical reality. Tengku Zafrul stated that the deal represented the “best possible outcome” for Malaysia and was necessary to defend the nation’s access to the USA markets. However, critics continue to characterise the RTA as a fundamentally unequal arrangement that effectively subordinates Malaysia’s interests to those of Washington.

Contention Over Sovereignty and US Alignment

The most significant point of contention centres on a clause within the RTA which stipulates that Malaysia shall “adopt or maintain a measure with equivalent restrictive effect” as any prohibition or restriction imposed by the USA on a third country, particularly if the USA considers that measure relevant to protecting its economic or national security. Critics interpret this as a clause that compels Malaysia to align its foreign trade policy with the dictates of Washington.

Allegations of Subservience

Former Prime Minister Dr. Mahathir Mohamad has claimed that the deal is lopsided and effectively makes Malaysia a “vassal state” bound to USA interests. The former Prime Minister was quoted as saying he did not expect to see “independence handed over” in his lifetime. Former international trade and industry minister Azmin Ali, the secretary-general of the opposition pact Perikatan Nasional, labelled this provision as the “most damaging clause” in the agreement.

Ali warned that if Washington were to restrict imports from a nation such as China or Russia, Malaysia would be compelled to follow suit, even if it were detrimental to the Malaysian economy. The opposition figure argued that by aligning its policies with USA decisions, the agreement risked alienating investors who value Malaysia’s longstanding political neutrality and stability.

Member of Parliament Hassan Karim also criticised the deal, claiming that Malaysia has made concessions worth RM1 trillion. Speaking in Parliament on 28 October 2025, Hassan Karim claimed the deal represented an “act of surrender, a transfer of wealth from poor Malaysia to the rich US,” referencing the nation’s colonial history. Additionally, the Consumers’ Association of Penang (hereinafter: CAP) and Sahabat Alam Malaysia (hereinafter: SAM) publicly called for the government to reject the agreement entirely, arguing that the terms effectively gave the USA “veto power over Malaysia’s independent foreign policy”.

Government’s Defence of the Reciprocal Trade Agreement

In response, Prime Minister Anwar Ibrahim rejected demands for his resignation over the signing of the RTA, asserting that Malaysia was not the only nation engaging in such bilateral discussions with the USA. Prime Minister Anwar stated that the RTA was not about “surrendering, betraying, or (subjecting the country to) a new form of colonialism”.

The Investment, Trade and Industry Ministry clarified that Malaysia is only obligated to impose restrictions on other nations to address economic or national security concerns that are “shared” by both countries, as reported by The Edge Malaysia. The Ministry stated that if an issue affects only the economic or national security of the USA but has no impact on Malaysia’s economic or national security, the nation would not need to consider emulating the USA’s actions.

The Attorney-General’s Chambers (hereinafter referred to as AGC) also provided an assurance that Malaysia’s sovereignty and national interests “remain fully protected.” The AGC stressed that Malaysia’s implementation of obligations under the agreement is subject to domestic law and applicable domestic procedures. Crucially, the AGC noted that Malaysia retains the unilateral right to terminate the agreement at any time by written notice to the USA without needing USA consent, under Article 7.5 of the agreement.

Minister Tengku Zafrul maintained that the RTA was a necessary measure to avoid tariffs on Malaysian goods to the USA market that could have reached 40 per cent or 100 per cent. The negotiations secured a reduced tariff of 19 per cent for Malaysian goods and exemptions for over 1,700 product categories.

Concluding Outlook

The core dispute surrounding the Malaysian-USA Reciprocal Trade Agreement is fundamentally an institutional conflict over the extent of national sovereignty in an era of heightened geopolitical competition. The Malaysian government, through the Investment, Trade and Industry Ministry and the Attorney-General’s Chambers, consistently justifies the RTA as a pragmatic response to unilateral USA tariff pressure, secured with built-in safeguards such as the right to terminate and the conditional nature of trade alignment. Conversely, critics focus on the explicit concessions concerning foreign policy alignment, market access, and technology control, which they argue legally entrench Washington’s strategic economic interests within Malaysian domestic policy, despite the existence of domestic law caveats.

The main trajectory indicates that, irrespective of the stated safeguards, the RTA solidifies an economic interdependence that will inevitably constrain Malaysia’s foreign policy options. The existence of a clause allowing the USA to reimpose high tariffs should Malaysia enter into an agreement that jeopardises “essential interests” of the USA presents a clear deterrent, compelling future Malaysian administrations to weigh new trade deals against the imperative of maintaining access to the critical USA market. This institutional reality suggests that the RTA will function less as a standard reciprocal trade pact and more as a foundational geopolitical arrangement, subtly limiting Malaysia’s capacity for genuine non-alignment in future trade and technology disputes.