From Dr Helmy Haja Mydin

When Prime Minister Anwar Ibrahim welcomed US president Donald Trump to Kuala Lumpur yesterday ahead of the 47th Asean Summit, the handshake (and joget) was more than ceremonial.

It marked a decisive moment for Malaysia – a middle power turning geography into strategy, hosting great-power diplomacy, and transforming neutrality into influence.

Washington’s return to Southeast Asia

The deal signed between the US and Malaysia commits Kuala Lumpur to expand market access for US goods and services, reduce tariffs and non-tariff barriers, and partner on critical minerals supply chains and technology trade.

Specifically, Malaysia pledged to “refrain from banning or imposing quotas on exports to the US of critical minerals or rare earth elements”.

The US secured preferential access for chemicals, machinery, electrical equipment, passenger vehicles, and agricultural exports under the agreement.

In return, Malaysia extracted more than symbolic concessions.

Non-stop negotiations led by investment, trade and industry minister Tengku Zafrul Aziz had earlier resulted in a drop in US tariffs on Malaysian exports from 25% to 19%, and now 1,711 tariff-line exemptions worth more than US$5 billion of our exports (including palm oil, rubber, pharmaceutical products, aircraft parts, and cocoa).

It has also opened the door for greater US investment in Malaysia’s semiconductor back-end, aerospace and clean-energy sectors, alongside technology-transfer provisions and commitments to support Malaysia’s digital-economy and supply-chain resilience goals.

In short, Washington is signalling that its focus is shifting back to Southeast Asia – not only as an economic region, but as a geopolitical buffer against China’s rising influence.

Politico reported that the final deals and two framework agreements announced on Sunday cover about 68% of approximately US$475 billion in two-way trade between the US and Asean members.

Malaysia, by signing early and conspicuously, repositions itself as a lead partner rather than a passive bystander.

China and Asean

At the same time, China continues to play a powerful role in the region.

The Financial Times reported that Chinese negotiators held talks in Kuala Lumpur on issues such as rare earth metals and export controls ahead of the upcoming meeting between Trump and Chinese president Xi Jinping in South Korea.

Malaysia’s role as chair of Asean – and of such high-stakes diplomacy – gives it a seat at the table of the world’s two largest economies.

Malaysia’s ability to remain sufficiently neutral, not aligning exclusively with either power, gives it bargaining power.

Malaysia benefits from China’s upstream supply-chain stakes in Southeast Asia (for example, rare earths processing) even as it now turns the US trade deal into a vehicle of value.

The new American commitments on semiconductor investment, technology transfer, and supply-chain cooperation allow Malaysia to diversify its dependencies.

By securing access to US capital and certification pathways, Malaysia gains leverage to negotiate better financing and technology terms from Beijing, particularly in green-energy and digital infrastructure projects where Chinese firms have dominated.

For China, this forces a recalibration: Malaysia is no longer merely an investment destination but a regional hub with options.

By playing both corridors (Chinese upstream capacity and US downstream technology), Malaysia hedges against over-exposure to either bloc while reinforcing its Asean credentials as a connector, not a combatant, in the Indo-Pacific economic theatre.

Thus, the country sits at the intersection of US demand for supply-chain diversification, China’s technological and resource ambitions, and Asean’s broader aspiration of regional autonomy.

Why location and timing matter

Becoming host to both the US-Asean trade negotiations and the US-China trade talks confers several advantages on Malaysia.

By hosting the summit and trade-deal signings in Kuala Lumpur, Malaysia shapes the optics and signals to both Washington and Beijing that it seeks to be regarded as a pivot rather than a pawn.

The US pact aligns neatly with Malaysia’s national priorities – digital transformation, energy transition, and industrial upgrading – creating new entry points for capital and technology from both sides.

At the same time, Malaysia’s simultaneous hosting of Asean dialogues and meetings at the sidelines, including managing intra-Asean frictions, has reinforced our reputation as a credible interlocutor.

In a world of bifurcated supply chains, maintaining open channels with both the US and China provides Malaysia with resilience and insurance against external shocks, strengthening its position as a steady bridge between competing global powers.

Walking a tightrope

This delicate balancing act carries clear risks. An over-commitment to Washington could invite retaliation from Beijing in trade, tourism or investment flows.

At the same time, domestic capacity may struggle to meet the implementation demands of the US deal, which requires regulatory reforms, digital-trade openness, and greater transparency in procurement.

Equally, Asean coherence is at stake. Malaysia must avoid being perceived as America’s proxy within the bloc. Its influence depends on neutrality and the ability to convene, not simply align.

To make the most of this moment, Malaysia must move swiftly to operationalise the US trade and critical-minerals pact, particularly by developing downstream processing plants and updating investment-screening mechanisms.

It should also continue to use its hosting leverage to promote trilateral cooperation among the US, China and Asean in areas such as digital standards, climate finance, and regional supply-chain security.

At the same time, Malaysia must continue to champion Asean unity, framing its neutrality not as indecision but as a form of regional leadership.

Strengthening institutional capacity will also be essential to meet the complex obligations that come with trade and technology partnerships of this scale.

A model for middle powers

Malaysia’s current manoeuvre reflects a broader transformation: middle powers are no longer mere spectators in great-power rivalry.

They are architects of connectivity and diplomacy. In this context, Anwar’s Malaysia is not merely reacting; it is shaping.

The fact that Malaysia hosted both US-China trade dialogues and the signing of its own bilateral pact underlines an emerging truth: power in the 21st century lies not only in who dominates, but in who convenes, who connects, who hosts.

For Malaysia, the prize is not simply a trade surplus or new investment flows, but strategic relevance.

In the shifting sands of the 2020s, that may be the most valuable commodity of all.

Dr Helmy Haja Mydin is the chairman of the Social Economic Research Initiative.

The views expressed are those of the writer and do not necessarily reflect those of FMT.