This was up from the 24% tariff that the US had originally proposed to levy on certain exports from Malaysia, but it was paused for 90 days to enable negotiations to proceed. The pause ended yesterday.
Stephen Olson, who represented the US in negotiations for two free trade agreements, said that while it would be premature to conclude that Malaysian negotiators have failed, it was a “safe bet” that the concessions Malaysia has offered so far have been insufficient.
“This is a high-profile intermediary milestone, but don’t draw any conclusions until the game is over,” he said.
“There are several weeks of negotiating left, and a further extension is always possible after that.
“Malaysia should review its positions and the specific complaints raised by the US, but beyond a certain point, additional concessions are not worth the deal. Judging exactly where the red line lies is always difficult,” he added.
US President Donald Trump, who wrote to multiple heads of state to alert them to the tariff rates their countries will face next month if no deals are reached, told Prime Minister Anwar Ibrahim that the 25% tariff was necessary to correct the “unsustainable” trade deficit the US has with Malaysia.
Trump said the deficit, which he has described as a “major threat” to the US economy and national security, was due to Malaysia’s long-standing tariff and non-tariff barriers.
The Office of the US Trade Representative (USTR) previously identified Malaysia’s strict rules on halal imports and Bumiputera equity requirements as barriers which contributed to the 24% tariff initially imposed on April 2.
In its 2025 National Trade Estimate (NTE) Report on Foreign Trade Barriers, the USTR said Malaysia’s halal standards exceed international norms, requiring dedicated halal-only facilities and complex registration processes, which increase costs and delay exports.
The report also flagged investment barriers, particularly the requirement for 30% Bumiputera ownership in foreign-owned firms and restrictions in sectors such as oil and gas, media, and public procurement.
During a special parliamentary meeting in May, Anwar reaffirmed that core national policies — including the Bumiputera policy, local vendor requirements, and protections for strategic sectors — would remain unchanged in US tariff talks.
Economist Geoffrey Williams proposed a pragmatic easing of restrictions, stating this may not necessarily shift demand away from local products.
He also noted that public sentiment toward US companies in Malaysia has been affected by their reported business ties with Israel.
“Malaysia could simply remove tariffs and non-tariff barriers across the board and leave the choice to consumers and businesses.
“Even without tariffs, US products are not priced competitively in Malaysia, so it should not be presumed that removing tariffs will flood Malaysia with US products,” Williams added.