On 2 April, 2025, President Donald Trump comprehensively damaged decades of work spent building a global trading regime to support greater economic openness and integration.¹ In the months since his original “Liberation Day” tariff announcement, governments, companies, investors, and consumers have struggled to determine just how much existing economic structures will be changing and how much more disruption to economic activity lies ahead.

The past week alone has also comprehensively illustrated the scale of challenges particularly for governments and firms looking to muddle through a messy period of readjustment. Although all policymakers in Asia are struggling to a greater or lesser degree with calibrating effective responses, Malaysia’s bilateral “reciprocal trade” deal with the United States, signed on 26 October despite its apparent contradictions to Malaysia’s trade commitments in Asia both new and existing, provides a telling lens that highlights the challenges ahead.

The fall calendar in Asia is typically driven by the runup to its “summit season,” with country leaders gathering in the region to celebrate the conclusion of the Association of Southeast Asian Nations (ASEAN) annual slate of meetings with approval on a set of deliverables from various sectoral bodies within the organization, a rapidly growing list of additional gatherings including by heads of the Regional Comprehensive Economic Partnership (RCEP), the East Asia Summit (EAS), the Asia-Pacific Economic Cooperation (APEC), and ASEAN engagements with official Dialogue Partners like the European Union, Canada, and the United States. These formal government meetings are typically supplemented by a range of important business events.

Following ASEAN’s packed schedule, the 21-member economies of APEC then gather for their own annual calendar conclusion. The grouping ends one chairmanship and rotates to a new chair. APEC also supports a parallel set of business engagements. Not every APEC meeting is hosted in Asia, of course, as the economies span the Pacific, but the timing of the meeting always follows ASEAN.

This year, with Malaysia serving as Chair of ASEAN, the week started in Kuala Lumpur and ended on 1 November in Gyeongju with South Korea as Chair of APEC. The opportunity to connect with trade partners across government and business has never been more important.

Between the usual statements of outcomes and deliverables that dominate the summit season, this year also featured a range of new trade announcements that illustrate the tightrope on trade and economic policies that governments are increasingly facing.

Malaysia provides a good example of the issues that are keeping government officials awake at night. As chair of ASEAN, Malaysia tried to steer a united response to Liberation Day and the buffeting effects of rapid tariff changes on a trade-exposed region. However, given the differential impact of tariffs and uneven levels of reliance on the United States for economics and security, ASEAN members were unable to maintain a joint response to the White House.²

Instead, each member had to manage US pressures independently. Heading into the summit week, only Indonesia had concluded and released details about their bilateral economic framework.³

Malaysia had not yet wrapped up a set of commitments with the United States, although the domestic pressure to do so was high given the relative importance of the US market to Malaysian goods exports. Malaysia’s reciprocal tariff rate was set at 19%, with no relief from current or future sectoral Section 232 tariffs. Of particular concern had been the threat to apply Section 232 tariffs to semiconductors and a wide array of electronics products which are a linchpin to Malaysia’s high-value global exports.

After a bilateral meeting between President Trump and Prime Minister Anwar, the two sides agreed on a new economic agreement as well as a separate commitment on critical minerals.⁴

On tariffs, the agreement capped the US reciprocal rate at 19% (added to any existing Most Favoured Nation or MFN rate).⁵ It did not address current or future Section 232 tariffs. Malaysia agreed to reduce its tariffs on nearly all items imported from the United States and to make adjustments to its existing tariff rate quotas (TRQs) on products such as swine, milk, cream, and eggs. The agreement did not provide additional insights or definitions of the term “transshipment” with existing globally applied tariff rates of 40% already in place, nor provide specific rules of origin to be followed with regard to third countries unless, the agreement noted, development of such rules “becomes necessary.”

Other highlights in the agreement and annex commitments included alignment around US technical standards, with special preferential access for US agricultural products and pledges to allow American goods certified as halal by the religious authority abbreviated as JAKIM to enter Malaysia with no additional requirements. The US and Malaysia also agreed on a range of terms for meat and cheese products without geographical indication (GI) restrictions. The US also included language on labor, environment, and digital trade.

Three other areas are notable. First, Malaysia agreed to follow a series of “complimentary actions” for economic and national security, including, in Article 5.1, mirroring any US actions on customs duties, quotas, prohibitions, fees, charges, or other import restrictions of goods or services from “third countries” that impinge on the national security of the United States. These mirror provisions were expanded in Article 5.2 to include a range of export controls.

Second, Malaysia agreed to a series of what are called “commercial considerations and opportunities,” in Section 6. These include specific investment promises such as the purchase of 30 Boeing aircraft and a purchase option for an additional 30, commitments by Petronas to buy US$2 billion in liquified natural gas (LNG) per year, multinational companies will buy US$150 billion in specific equipment from American companies as detailed in Appendix I, and a promise to put US$70 billion into the US Capital Fund over 10 years.

The agreement is set to come into force 60 days after the parties both certify that they have completed domestic procedures to align with the commitments. This will have to include the creation of legal and regulatory structures necessary for Malaysia to be able to effectively mirror US actions on economic and national security. Once in force, the agreement is legally binding, although there is no specific dispute settlement mechanism, and the deal may be terminated at any time with 180 days’ notice.

Trade watchers will find much of interest in the specific terms of this agreement. Although many of the topics and provisions would not look out of place in similar commitments made in prior years, the balance of benefits in this agreement is unusual.

But perhaps more important than the details for Malaysia is the way this agreement sets up a challenging muddle for the future. As Malaysia’s agreement is not dramatically different from the one for Cambodia⁶ and will likely be similar to the frameworks under discussion with Vietnam⁷ and Thailand,⁸ it is worth looking at some of the tensions between these bilateral commitments with the United States and economic pledges made in other settings.

At the same time Malaysia and other ASEAN members were working on bilateral arrangements with the United States, they were also approving the third upgrade to the ASEAN-China FTA. This deal, first announced in 2002 and in force since 2005, has now been expanded to include commitments on digital trade, green technology, and supply chain connectivity.⁹

ASEAN members also held the annual RCEP Leader’s meeting, where they pledged to press ahead with effective implementation, address accession of new members, strengthen the institutional mechanisms including the creation of an effective Secretariat, and prepare for the 2027 general review and potential upgrades.¹⁰ RCEP, which includes all 10 members of ASEAN plus China, Japan, Korea, Australia and New Zealand, came into force in 2022.¹¹

There is clear tension between some of the commitments in the new US bilateral with Malaysia’s existing and likely future promises made in these larger regional agreements, particularly the new provisions on economic and national security as applied to third countries.

Some of the provisions in the US bilateral may also present problems for Malaysia’s relations with other important countries. For example, the US-Malaysia deal’s language on cheese and meat designations comes into conflict with the European Union requests in their ongoing bilateral negotiations with Malaysia. The halal certification rules, alignment with US standards, and promises to expedite US agricultural product entry into the country could present challenges for exports of key products out of other Malaysian partners like Australia or Canada. Malaysia’s commitments under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) could also be a challenge to manage and subject to potential disputes from other CPTPP members harmed by Malaysia’s new commitments to provide preferences for US goods and services.

The US demanded that Malaysia not enter digital arrangements that could “jeopardize essential US interests” at the exact moment that ASEAN members were signing their internal Digital Economy Framework Agreement (DEFA).¹²

Though Malaysia’s agreement to such a deal has been viewed by many even domestically as an egregious giveaway, particularly in its leadership capacity as Chair of ASEAN, Malaysia’s challenge is not dissimilar from what lies ahead for most governments. Past experience is proving a poor guide to decision making now. Governments are having to choose from the “least worst” option, in some instances, rather than aim for win-win outcomes and hope that future trends make today’s decisions more palatable than they first appear.

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In the news: Deborah Elms spoke to Bloomberg (28 October 2025), Channel NewsAsia (29 October 2025), and The Straits Times (2 December 2025) as summit season in Asia draws to a close, with trade deals concluded between the US and several Southeast Asian states.