By Lucien Morell

JAKARTA, Indonesia: Malaysia has long taken pride in its ability to maintain an independent foreign policy, being friendly to all and aligned with none. Yet the newly signed Agreement on Reciprocal Trade between the U.S. and Malaysia threatens to upend that delicate balance. 

What is being sold as a boost for trade and investment may, in fact, mark the quiet surrender of Malaysia’s economic sovereignty to Washington’s geopolitical agenda.

At first glance, the deal appears straightforward: a continuation of a 19 percent tariff rate on Malaysian exports to the U.S., alongside exemptions for over 1,700 export lines. However, buried within the text is Article 5.1, a clause that effectively binds Malaysia to U.S. foreign policy. 

Under this provision, if the United States imposes tariffs, quotas, prohibitions, or other trade measures against another country to protect its so-called economic and national security, Malaysia is obliged to take similar actions or agree to a timeline to do so. 

In practice, this turns Putrajaya into a proxy executor of U.S. sanctions policy, forcing it to adopt punitive trade restrictions even when they run counter to Malaysia’s national interest.

Worse still, the agreement compels Malaysia to crack down on companies operating within its borders that are owned or controlled by foreign states — particularly those exporting below-market-price goods to the United States or allegedly harming U.S. export interests. 

This opens the door for Washington to pressure Malaysian authorities into targeting firms with links to China, Russia, Iran or other nations currently out of favour in Washington. 

The precedent is dangerous: the U.S. effectively gains veto power over who can trade out of Malaysia, thereby undercutting the very idea of Malaysia as an independent economic actor.

This new dependency is especially troubling given the global context. China remains Malaysia’s largest trading partner, while Russia and the broader BRICS bloc offer growing opportunities in energy, defence and technology cooperation. 

By aligning itself so closely with the U.S., Malaysia risks alienating these key partners and entangling itself in conflicts not of its making. It is one thing to trade with the U.S., it is quite another to police U.S. trade wars on its behalf.

The warning signs are all too familiar. The Nord Stream pipeline sabotage demonstrated how far geopolitical rivalry can go when economic infrastructure becomes a target. 

Now, with similar acts of sabotage reported against energy facilities in Hungary and Romania, Malaysia should be cautious about being drawn into any bloc confrontation that might place its own assets, trade routes or partners at risk. 

Aligning too tightly with Washington risks making Malaysia part of a larger containment strategy — one in which Southeast Asia becomes a chessboard rather than a player.

Even within Malaysia, scepticism is growing. Former Economy Minister Azmin Ali has long cautioned against the danger of over-reliance on foreign capital and warned of “economic capture” through lopsided deals. 

His view that Malaysia must “seek better offers, not easy ones” now rings truer than ever. Yet, instead of strengthening self-reliance, this trade pact ties Malaysia’s economic policy to the shifting moods of Washington’s foreign strategy.

Supporters of the deal, including Malaysia's Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz, claim that the agreement protects Malaysian interests and that Malaysia is under no legal obligation to seek U.S. approval for other trade arrangements. 

But the reality is subtler and more perilous. By signing a pact that mandates consultation before Malaysia concludes digital or technology trade deals with others, the government effectively invites Washington to sit at the negotiation table of every future Malaysian trade discussion.

In the longer term, the implications are stark. Should Malaysia ever wish to pursue closer integration with Asian or Eurasian frameworks, whether through RCEP, BRICS, or bilateral pacts with China, Russia or Iran, it will first have to consider whether such moves conflict with the political and economic interests of Washington. That is not sovereignty; it is conditional independence, written in the fine print of a trade agreement.

If this continues, Malaysia will lose its voice not only in ASEAN but in the wider multipolar order now taking shape. The region’s future will not belong to those who act as proxies, but to those who stand firm on the principle of balanced engagement and mutual respect.

In the final analysis, Malaysia’s leaders must ask themselves a simple question: does this agreement make the nation stronger or more dependent? The answer, sadly, is already clear. 

Unless Putrajaya re-examines the pact and reasserts its right to independent economic policy, this deal will go down in history not as a triumph of trade diplomacy, but as a quiet capitulation of sovereignty.

The use of such coercive economic tactics masked as “partnership” may win Washington short-term compliance, but it will ultimately undermine the credibility the U.S. once enjoyed. 

Worse, it will erode trust in Malaysia’s neutrality and weaken the very multipolar balance that gives smaller nations their leverage. In the end, the more the great powers weaponise trade, the faster they corrode the order they claim to defend.

*Lucien Morell is a Southeast Asia based geopolitical observer and analyst.*