Different Approaches by Indonesia and Malaysia to US Trade\nAgreement<\/p>\n
Jakarta, CNBC Indonesia - The neighbouring nations of Indonesia and\nMalaysia have adopted contrasting stances towards a trade agreement with\nUS President Donald Trump. This agreement pertains to the bilateral\nAgreement on Reciprocal Trade (ART) established by the US.<\/p>\n
Under President Prabowo Subianto\u2019s administration, the Indonesian\ngovernment maintains that the reciprocal trade agreement, signed on 19\nFebruary 2026, remains in effect. In contrast, Malaysia has chosen to\ncancel the agreement following the US Supreme Court\u2019s annulment of\nTrump\u2019s reciprocal tariff policy on 20 February 2026.<\/p>\n
Malaysia\u2019s Minister of Investment, Trade, and Industry, Johari Abdul\nGhani, has refused to describe Malaysia\u2019s ART with the US as suspended.\nHe asserted that the agreement between the two countries has been\ncompletely cancelled in light of the US Supreme Court decision.<\/p>\n
\u201cThis is not suspended. It no longer exists; it is cancelled and no\nlonger valid,\u201d Johari stated, as quoted from the New Straits Times on\nTuesday (24\/3\/2026).<\/p>\n
He explained that the US Supreme Court ruled that the imposition of\ntariffs must have a clear basis. Consequently, the reciprocal tariff\npolicy previously implemented by Trump cannot be enforced.<\/p>\n
\u201cThe US Supreme Court has decided that if you want to impose tariffs,\nyou must have a reason. They cannot impose tariffs across the board,\u201d he\nemphasised.<\/p>\n
Following this ruling, the US government is now altering its trade\npolicy approach. Washington is relying more on other instruments, such\nas temporary 10% tariffs under Section 122 of the Trade Act, which can\nbe followed by stricter investigations via Section 301.<\/p>\n
According to Johari, this mechanism will assess whether a country\u2019s\npolicies or practices are deemed unfair or discriminatory against US\ntrade. Potential issues that could be highlighted include dumping\npractices due to excess industrial capacity, alleged labour violations\nsuch as the use of illegal or forced labour, as well as environmental\nbreaches and export subsidies.<\/p>\n
He warned that Malaysian companies failing to comply with standards\ncould face export restrictions to the US. Even the country as a whole\nrisks higher tariffs if it is found to have failed in addressing such\npractices.<\/p>\n
Malaysia\u2019s exports to the US in 2025 reached approximately RM233\nbillion, equivalent to around Rp790 trillion. Key sectors potentially\naffected include electrical and electronics (E&E), oil and gas,\nplantation commodities like palm oil, and rubber-based products such as\ngloves.<\/p>\n
Johari added that the US investigations target not only Malaysia but\nalso around 60 other trading partner countries. He stressed the\nimportance of exporters complying with international standards,\nparticularly in labour and environmental areas.<\/p>\n
\u201cWhat is important is that what we do must not harm the environment,\nthe country, or the climate,\u201d he said.<\/p>\n
For context, the previous ART provided significant relief for\nMalaysia. At the peak of the Trump-era trade war, Malaysian exports\nfaced threats of up to 47% tariffs, which were negotiated down to 24%.\nUnder the ART scheme, these were further reduced to 19%, with as many as\n1,711 Malaysian products receiving zero per cent tariff facilities.<\/p>\n
As for Indonesia, it considers the established ART agreement between\nthe two leaders to still be valid. This holds despite the US Supreme\nCourt decision and investigations by the US Trade Representative\u2019s\nOffice (USTR) into 16 countries, including Indonesia, as part of the\nresponse to the Supreme Court ruling.<\/p>\n
Coordinating Minister for the Economy Airlangga Hartarto affirmed\nthat the 1,819 Indonesian commodities receiving zero per cent tariff\nfacilities from the US, resulting from the ART signing, remain\napplicable. Even with the trade investigations conducted by the\nUSTR.<\/p>\n
\u201cFor the 1,819 commodities that are already at 0%, they remain at\n0%,\u201d Airlangga said during a media gathering at the Coordinating\nMinistry for the Economy office in Jakarta last Monday.<\/p>\n
These zero per cent tariffs apply to key agricultural and industrial\nproducts, such as palm oil, coffee, cocoa, spices, rubber, electronic\ncomponents, aircraft components, and textile and apparel products from\nIndonesia. The Indonesian government views this tariff exemption from\nthe US as providing tangible benefits to over 4 million workers in\nrelated sectors.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/different-approaches-by-indonesia-and-malaysia-to-us-trade-agreement-1774313502", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }