Malaysia’s US tariff deal comes with a US$240 billion price tag
Analysts warn unfunded government commitments could drain state funds and far outstrip the country’s existing trade imbalance with the US

Malaysia’s relief from securing a 19 per cent tariff from Washington is giving way to the reality of facing a US$240 billion bill to address the US deficit in their bilateral trade, with analysts warning that the country could ultimately lose out.
Southeast Asia’s economies were hit last week with tariffs by the US administration after months of threats by US President Donald Trump and negotiations between Washington and its trade partners in the region.
Most of the region’s biggest economies – Indonesia, Thailand, the Philippines, as well as Malaysia – face a 19 per cent tariff while Vietnam is charged a 20 per cent levy. These economies count the US among their top export destinations.
The figure was initially welcomed in the region as a reprieve when compared with tariffs of up to 49 per cent imposed on other countries. However, fears are mounting that Southeast Asian economies would have to foot an exorbitant bill for years to come because of their separate tariff deals.
Malaysia’s Trade Minister Tengku Zafrul Aziz told parliament on Monday that the country’s major companies would have to fork out up to US$150 billion over five years to buy US hi-tech products as part of a deal reached between both countries.
The deal includes an earlier US$19 billion commitment by national carrier Malaysia Airlines to buy as many as 60 Boeing commercial jets and a US$3.4 billion annual purchase of US liquid natural gas by energy giant Petronas.
Calling it a “reasonable outcome” achieved without “compromising our core policies and national sovereignty”, Tengku Zafrul said Malaysia would pump US$70 billion of investments into the US economy over the next 10 years. This dwarfs the US$5.7 billion that Malaysian Prime Minister Anwar Ibrahim has earmarked to boost domestic industries and enterprises over the next five years.
Further details will be outlined in a bilateral trade agreement at a later date.

But experts have warned that Malaysia may ultimately have to tap its state funds to finance the purchases of US products and investments.
“[The government] has to explain to the public or whoever the sources of capital are that whatever investments they are making are real and potentially profitable,” said Adib Zalkapli, managing director of geopolitical and public policy advisory firm Viewfinder Global Affairs.
“We don’t know yet who and how they will invest in the US … for now we just have the headline numbers.”
At an estimated US$240 billion, Malaysia’s planned investments and purchases of American products far outstrip the US$25 billion deficit registered by the US in their bilateral trade last year.
Malaysia’s US-bound investments totalled just US$400 million last year and it would now have to decide how to divert its investments in other countries, said Doris Liew, a Kuala Lumpur-based economist.
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“To meet the new targets, there will likely need to be reallocation of investments currently concentrated in Singapore, Indonesia and Thailand which are Malaysia’s primary outward foreign direct investment destinations,” Liew added.
Deal now, pay later
But the deal also presented opportunities for Malaysia to grow its business presence in the US, said Damien Duhamel, managing partner at strategy consultancy Eurogroup Consulting. Long-established ties with US firms such as Boeing, Intel and Microsoft could provide a bridge for Malaysian firms to clinch profitable deals in the world’s biggest economy.
“Malaysia can ‘afford’ it only if commercial private-sector motivations align and financing structures are sound,” Duhamel said. Nonetheless, there could be “public fiscal risk increases if borrowing or guarantees are involved”, he warned.
In March, Anwar’s administration caved to pressure from Washington to tighten rules on semiconductor shipments following reports that advanced Nvidia chips had been shipped from Singapore via Malaysia to China.
The tariff deal will also lead to an easing of procedures for halal certification of American beef and poultry – a decision that critics have said could undermine Malaysia’s reputation as a global halal standard bearer.
Tengku Zafrul has defended the move, saying it would only apply to monitoring and verification by US halal certification bodies approved by Malaysia’s religious department and would not compromise its sharia-compliant standards.
Malaysia could consider tapping into government-linked investment firms like the Employees Provident Fund private pension fund and sovereign wealth fund Khazanah Nasional to finance its US investments and purchases, according to analysts. If the funds are spent wisely, it could lead to a transfer of technology, skills and capital to Malaysia.
“This is about smart money where Malaysia gains access to technology, markets and supply chains that it normally would not,” said Kamles Kumar, Malaysia lead at strategic advisory firm Asia Group Advisors.