THE government has acknowledged that a comprehensive cost-benefit analysis of the Agreement on Reciprocal Trade (ART) with the United States is being carried out only after the pact was entered into, following sharp and unpredictable tariff actions by Washington that threatened Malaysia’s trade and investment environment.
In a written reply tabled in the Dewan Rakyat on Tuesday, Ministry of Investment, Trade and Industry Datuk Seri Johari Abdul Ghani said such an analysis would normally take between six and 12 months to complete, but circumstances surrounding the agreement required swift engagement with the United States.
The response was given to a question from Dr Radzi Jidin (PN–Putrajaya), who asked whether the government had conducted a detailed cost-benefit analysis before signing the agreement and which agencies were involved, as well as whether the agreement could be renegotiated or terminated.
Johari explained that ART was not a conventional bilateral trade agreement, but a unilateral arrangement initiated following the United States’ decision to impose a 24 per cent tariff on Malaysian products on April 2, 2025.
Malaysia subsequently entered into negotiations with the US, and on July 7, 2025, MITI was informed of the possibility that the reciprocal tariff could be increased to 25 per cent.
Following further negotiations, the tariff rate was reduced to 19 per cent on August 1, 2025.
The ministry warned that prolonged uncertainty over tariff rates could create an unconducive investment climate, potentially prompting foreign investors to shut down operations in Malaysia and relocate to countries facing lower tariffs.
Such a scenario, it said, would have a cascading effect on local small and medium enterprises that supply goods and services to multinational companies, ultimately leading to job losses and reduced income for a large segment of the population.
MITI said it is currently conducting the cost-benefit analysis together with its agencies, including the Malaysia External Trade Development Corporation and the Malaysian Investment Development Authority, with support from MIDF Research.
The analysis will focus in particular on Malaysia’s exports to the United States, valued at RM233.1 billion, and the country’s trade surplus of RM98.7 billion.
On the possibility of renegotiating or terminating the agreement, the ministry said Malaysia has yet to receive any formal notice from the United States on a timeline for ratifying the pact.
As such, the government is reviewing the substance of the agreement to ensure national economic interests are safeguarded and risks to trade are minimised.
It added that since the imposition of unilateral tariffs falls under the prerogative of the United States, terminating the agreement would likely result in an uncertain and unstable economic environment.
“Because the imposition of unilateral tariffs is the prerogative of the United States, terminating the Agreement on Reciprocal Trade would create an uncertain and unstable economic environment,” the ministry said. - January 27, 2026
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