China's Ministry of Commerce expressed serious concerns on Thursday over certain contents of the reciprocal trade agreement between Malaysia and the United States, urging Malaysia to carefully weigh its long-term interests. On Tuesday, officials from both countries held bilateral consultations in Beijing on issues related to the deal, where Malaysia provided explanations and clarifications.
China's Ministry of Commerce spokesperson stated that China welcomes Malaysia's efforts to resolve differences with other countries through trade agreements, but such deals should not negatively impact global trade development and regional cooperation, nor harm China's interests. The agreement was signed last month, raising Beijing's concerns, particularly over provisions that may limit Malaysia's ability to pursue independent trade deals.
Analysts highlight Article 5.3 as the core issue, which permits the US to reimpose higher tariffs if Malaysia enters a trade deal with any nation deemed to jeopardize essential US interests. Lynn Song, chief economist for Greater China at Dutch investment bank ING, said: “China isn’t mentioned explicitly, so there remains a level of ambiguity – in theory it could be referring to other countries such as Russia or Iran.” She noted that such clauses appear to pressure countries into “choosing a side,” likely explaining China's concerns.
During Tuesday's consultations in Beijing, officials from Malaysia's Ministry of Investment, Trade and Industry provided explanations and clarifications on China's concerns, stating that Malaysia values its long-term partnership with China and remains committed to deepening bilateral economic and trade cooperation. Beijing did not publicly specify the offending clauses, but critics view these 'poison-pill' provisions as a geopolitical trap to force neutral countries into upholding Western containment strategies against China.
The Malaysian side addressed the issues raised, reaffirming its commitment to China. This episode underscores the impact of US-China geopolitical rivalry on Southeast Asian trade dynamics.