Malaysia’s ART trade deal boosts economy amid regional tensions

Malaysia’s new ART trade deal sparks debate over economic benefits and risks

Malaysia’s economic outlook is brightening despite regional tensions. While Japan’s yen struggles amid a dispute with China, Malaysia’s ringgit has strengthened by 8% this year. Meanwhile, the Kuala Lumpur stock market continues its upward trend, prompting analysts to revise their forecasts for the better.

At the same time, the country’s new trade deal with the United States—the Agreement on Reciprocal Trade (ART)—has sparked debate. Critics argue the pact is unbalanced, while supporters highlight its flexibility and potential benefits for key industries.

The ART agreement includes several exemptions for Malaysia’s major exports. Pharmaceuticals, palm oil, cocoa, and rubber will face no tariffs under the deal. Semiconductor-related goods also receive conditional exemptions, which can expand if Malaysia meets certain trade conditions.

Tariffs under ART are capped at 19%, though further negotiations could adjust this rate. The baseline, however, cannot fall below 10%—the same rate granted to Singapore. Unlike rigid colonial-era agreements, ART allows for ongoing adjustments through review panels, technical committees, and continuous consultations.

Despite its potential advantages, the deal has faced sharp criticism. Opponents claim it favours the US disproportionately, calling it risky or even neo-colonial. Others point out that ART lacks the finality typical of past agreements, with many clauses open to appeals and further discussion. By the end of the month, one or more Parliamentary Select Committees will examine the deal more closely.

While Japan’s economic spat with China has weakened the yen, Malaysia and the broader Asia-Pacific region remain unaffected. Taiwan’s economy has also stayed stable amid the tensions, reinforcing the view that Malaysia’s growth is on solid ground.

Malaysia’s economy is showing resilience, with a stronger ringgit and rising stock market. The ART deal, though controversial, offers exemptions for critical industries and room for future adjustments. As lawmakers prepare to review its terms, the agreement’s long-term impact will depend on how negotiations unfold in the coming months.