Malaysia

The Malaysia–US Agreement on Reciprocal Trade (ART), signed in October 2025 and which had negotiated Malaysian export tariffs down to approximately 19 percent, was declared 'null and void' by Malaysian Trade Minister Johari Abdul Ghani following a February 20, 2026 US Supreme Court ruling that struck down the IEEPA-based reciprocal tariff regime. The US side has not received formal withdrawal notification from Kuala Lumpur's Prime Minister's office and continues to urge Malaysia to uphold its commitments, leaving the bilateral trade framework in a state of active legal and diplomatic ambiguity.

The Diplomat · 2026-05-22

The US Office of the United States Trade Representative (USTR) launched Section 301 investigations on March 11–12, 2026 targeting Malaysia and other major economies for alleged industrial policy and forced-labor concerns, compounding the uncertainty created by the ART's contested status. Malaysian Trade Minister Johari indicated Kuala Lumpur will await the USTR's investigative findings before formulating a formal response, signaling a deliberate deferral of bilateral trade normalization.

StratNews Global · 2026-05-22

Malaysia's Ministry of Investment, Trade and Industry (MITI) reports that the country's 17 active Free Trade Agreements (FTAs)—including the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—generated RM2.005 trillion in trade with FTA partners in 2025, representing 65.5 percent of total trade and a bilateral surplus of RM128.58 billion. This multilateral trade architecture provides a durable hedge against bilateral US-Malaysia trade disruption for market entry strategies oriented toward ASEAN and Indo-Pacific supply chains.

MITI Malaysia (fta.miti.gov.my) · 2026-05-22

Full-year 2025 FDI inflows reached MYR 53.46 billion, up from MYR 51.53 billion in 2024, with Q4 2025 setting a record at MYR 27.82 billion; the Q1 2026 moderation to MYR 22.81 billion was attributed primarily to softer debt-instrument inflows rather than a structural deterioration in investor sentiment. The services sector, led by information and communication, continued to attract the largest share of foreign capital across both periods.

Trading Economics / Bank Negara Malaysia data · 2026-05-15

Malaysia's critical minerals and rare earths sector is projected to contribute RM91.9 billion (approximately USD 23.3 billion) to GDP by 2050, with the government banning raw rare earth exports—except under a Chinese-led pilot project—to capture downstream processing value. Federal-state jurisdictional tensions, illustrated by Petronas filing a Federal Court motion in January 2026 to clarify its regulatory framework in Sarawak, represent an ongoing structural constraint on resource-sector investment planning.

East Asia Forum · 2026-05-22

Malaysia's ongoing subsidy rationalization program has progressively reduced fuel and food subsidies since 2023, with 2025 reforms targeting chicken, eggs, and RON95 petrol; the reformed petrol subsidy retains a partial citizen discount, meaning full market-price efficiency has not been achieved. This incremental approach limits inflationary shock but sustains a fiscal subsidy burden that constrains the government's capacity for large-scale public investment co-financing.

East Asia Forum · 2026-05-22

Malaysia's 2026 ASEAN Chairmanship has elevated its regional diplomatic profile, including hosting an inaugural ASEAN–Gulf Cooperation Council–China Summit, while its BRICS partner-country status (effective January 1, 2025) deepens engagement with large emerging-market economies. These multilateral postures reinforce Malaysia's strategic positioning as a neutral commercial hub between US and Chinese spheres of economic influence.

East Asia Forum · 2026-05-22

The government's National Committee on Investment—jointly chaired by the Minister of Finance and the Minister of International Trade and Industry—functions as the primary regulatory gateway for approving new foreign investments, with sector-specific incentives including 'pioneer status' for industry, agriculture, and tourism, and 'MSC status' for information and communications technology and multimedia companies. Foreign investors in certain industries remain subject to local participation requirements covering equity ownership and board representation.

Lloyds Bank Trade / International Trade Portal · 2026-05-22

Sustained political stability under the Malaysia Madani unity government has been identified by market analysts as a key driver of investment confidence, complementing the government's strategic focus on high-technology and digital-driven investment to deepen and expand global supply-chain integration. However, analysts caution that global economic headwinds—including potential US recessionary pressures in the second half of 2026—may moderate the pace of both foreign and domestic direct investment relative to 2025 levels.

New Straits Times · 2026-05-22