Malaysia is trying to lower looming US tariffs to 20 %

The Malaysian government is negotiating with the United States to secure a 20% tariff rate, but remains hesitant to comply with certain demands made by President Donald Trump, including the opening of the electric vehicle (EV) market and land ownership laws.

Prime Minister Anwar Ibrahim is pushing for a tariff reduction below the 25% threshold, effective August 1. Malaysia aims to align its tax rates with regional neighbours such as Indonesia (19%) and Vietnam (20% for general goods, 40% for goods trans-shipped through Vietnam).

Malaysia is also working to ease US concerns over illicit semiconductor imports, but has opposed Washington’s request to extend tax relief for American-made EVs.

Earlier this month, Minister for Investment, Trade, and Industry (MITI), Zafrul Aziz, expressed confidence that Malaysia could reach a tariff deal, but recently warned of the potential downsides of an agreement, emphasising the challenges smaller, trade-dependent nations face in negotiations with the US under Trump’s administration.

Anwar said on Monday that the government has set a clear “deadline” for policies related to national interests.

Bloomberg analysis indicates that other countries in the region, like Vietnam, have also faced challenges in talks with the US. In early July, Vietnam was surprised by the US’s announcement to impose a 20% tariff, despite expectations of a better deal. The Vietnamese government stated last week that negotiations are ongoing regarding the terms of the agreement.

MITI declined to comment to Bloomberg. However, White House spokesperson Karoline Leavitt stated in a briefing on Monday that “the trade team and the President continue to work with countries around the world to secure trade agreements.”

Electric Vehicles and Fisheries

A Bloomberg source reveals that Malaysia is reluctant to extend tax exemptions for US-made EVs, as doing so would require granting similar tax benefits to other countries.

It remains unclear why the US, which is set to end its own EV tax credits soon, seeks market access in Malaysia, given the minimal presence of American EV manufacturers. In the first half of this year, Chinese companies, including BYD, accounted for nearly half of all new EV registrations in the country.

Furthermore, Zafrul noted that it is uncertain whether Malaysia will amend its foreign ownership laws, as some US requests may be seen as unfair. The government will consult stakeholders before any legal changes are made.

The source also highlighted that the US demand for Malaysia to reduce subsidies to the local fishing industry and limit overfishing represents an interference in domestic policy. The majority of fishermen in Malaysia are ethnic Malays, a key voting bloc for the government.

According to US trade representatives, the United States recorded a trade deficit of $24.8 billion with Malaysia last year.