Malaysian trade ministry: Tariffs will not be applied until the USTR finishes its full investigation and makes a formal ruling

Malaysia’s trade minister has indicated that the country will not apply the 19% reciprocal tariff rate under the U.S.-Malaysia Agreement on Reciprocal Trade (ART) until the U.S. Trade Representative (USTR) completes its ongoing investigations and issues a formal ruling. The statement follows a recent U.S. Supreme Court decision that invalidated the legal basis for many of the tariffs imposed under the International Emergency Economic Powers Act.

Trade Minister Johari Abdul Ghani stated that the ART is "null and void" in light of the court ruling, which required the U.S. to justify tariffs on a case-by-case basis rather than applying them broadly. He emphasized that the U.S. must specify the industries affected by any tariff imposition, aligning with the court's decision. Johari added that Malaysia is awaiting the outcome of the USTR's investigations under Section 301 of the U.S. Trade Act of 1974, which examines foreign trade practices for unfair or discriminatory behavior.

The USTR has initiated investigations into 60 countries, including Malaysia, to assess failures addressing forced labor practices in their supply chains. These investigations could influence the U.S. approach to tariffs and trade relations with Malaysia. Meanwhile, the U.S. has urged Malaysia to uphold its commitments under the ART, noting that the agreement provides preferential access for U.S. goods and services in the Malaysian market.

Malaysia's position introduces uncertainty into the bilateral trade relationship, particularly as the U.S. seeks to rebalance trade ties and address broader economic and labor concerns. Analysts have highlighted the importance of clarity and consistency in trade policy, noting that mixed messaging could undermine confidence and complicate negotiations. The situation remains fluid, with both sides navigating a complex and evolving trade landscape.