Malaysia Officially Cancels Trade Agreement with the US!

Malaysia has officially cancelled its Reciprocal Trade Agreement (ART) with the United States. This confirmation was provided by Malaysia’s Minister of Investment, Trade, and Industry, Johari Abdul Ghani.

Johari emphasised that the status of the ART is not merely suspended but has been fully cancelled. This decision follows the US Supreme Court’s ruling that annulled the broad tariff policies of the Donald Trump era.

“This is not suspended. It is no longer in place; it is cancelled and invalid,” Johari stated, as quoted from the New Straits Times on Wednesday (18/3/2026).

He explained that the US Supreme Court ruled that the imposition of tariffs must have a clear basis, meaning that previous comprehensive tariff policies cannot be applied.

“The US Supreme Court has decided that if you want to impose tariffs, you must have a reason. They cannot impose tariffs comprehensively,” he clarified.

Following this ruling, the US government is now changing its approach to trade policy. Washington is reportedly relying more on other instruments, such as 10% temporary tariffs based on Section 122 of the Trade Act, which can be followed by stricter investigations under Section 301.

According to Johari, this mechanism will assess whether a country’s policies or practices are considered unfair or discriminatory against US trade. Several issues that could be highlighted include dumping practices due to excess industrial capacity, alleged labour violations such as the use of illegal or forced labour, as well as environmental violations and export subsidies.

He warned that Malaysian companies failing to comply with standards could face export restrictions to the US. Even the country as a whole risks higher tariffs if deemed to fail in addressing such practices.

Malaysia’s exports to the US in 2025 reached approximately RM233 billion, equivalent to around Rp790 trillion.

Several key sectors that could be affected include electrical and electronics (E&E), oil and gas, plantation commodities such as palm oil, and rubber-based products like gloves.

Johari added that the US investigations target not only Malaysia but also around 60 other trading partner countries. He stressed the importance of exporters’ compliance with international standards, particularly in labour and environmental areas.

“What is important is that what we do must not damage the environment, the country, or the climate,” he said.

For context, the previous ART provided significant relief to Malaysia. At the peak of the Trump-era trade war, Malaysian exports were threatened with tariffs of up to 47%, which were negotiated down to 24%. Under the ART scheme, those tariffs were further reduced to 19%, and as many as 1,711 Malaysian products received zero per cent tariff facilities.