He, however, said the agreement was time-sensitive to avert a sharp decline in investments if the US imposed a 25% tariff.
Tengku Zafrul said Malaysia was the most at-risk country in the region because of its heavy reliance on electrical and electronics and semiconductor exports.
“It’s easy to accuse the government of being rash now that the biggest risk has been averted. It’s much harder to decide with a 25% tariff hanging over our economy.
“Investors were weighing whether to stay in Malaysia or shift to Vietnam, Thailand or Mexico,” he said when winding up the debate on the federal budget for his ministry in the Dewan Rakyat today.
He said the cumulative economic impact of not signing the ART could have reached hundreds of billions of ringgit and threatened hundreds of thousands of jobs in major industrial zones such as Kulim, Bayan Lepas, Batu Kawan, Pasir Gudang, Senai and Shah Alam.
Tengku Zafrul said Malaysia exported nearly RM200 billion worth of goods to the US from 2020 to 2024, 60% of which were E&E products and semiconductors.
He also said a joint analysis by the ministry with the central bank, the Malaysian Investment Development Authority, the Malaysia External Trade Development Corporation, and external experts showed that without the ART, gross domestic product growth could fall by nearly 1.2% annually, amounting to about RM30 billion.
“More than 7,000 SMEs in the supply chains of our technology companies would be exposed. That’s why under the ART, we ensured tariffs were capped at 19%, instead of 25% or higher,” he said.
Tengku Zafrul also rejected suggestions that Malaysia should have first waited for Asean’s collective position, saying regional solidarity cannot be used as a reason to sacrifice domestic economic interests.
“We cannot gamble with the livelihoods of workers in Kulim, Bayan Lepas or Pasir Gudang just to wait for a tough-looking group photo on a regional stage,” he said.
US president Donald Trump and Prime Minister Anwar Ibrahim signed the Malaysia-US trade agreement during the 47th Asean Summit in October.
Under the agreement, the US will maintain reciprocal tariffs of 19% on Malaysian goods, with certain products enjoying zero tariffs under aligned partner-trade lists.
Malaysia, in turn, committed to providing preferential market access to US industrial exports and not imposing bans or quotas on the export of critical or rare-earth minerals to the US.