KUALA LUMPUR – Malaysia inked a trade deal with the United States with President Donald Trump in attendance at the sidelines of the 47th Asean Summit on Oct 26, locking in a 19 per cent tariff rate that was agreed back in August.

The deal included several concessions made by Prime Minister Anwar Ibrahim’s administration, including in the supply of critical minerals to America, a key plank of ongoing trade negotiations between Washington and Beijing that centres on curbs of advanced technology supply chains.

US Trade Representative Jamieson Greer said the agreement ensures that trade investment in critical minerals between both sides “can be as free as possible and as resilient as possible”.

“We live in a world where having these critical minerals is important to our manufacturing, to our technology and to our economy. It is very important that we cooperate as willing partners with each other to ensure that we can have smooth supply chains.”

The 19 per cent tariff, however, will not affect about 60 per cent of Malaysia’s RM200 billion (S$61 billion) of exports to the US such as semiconductors and pharmaceuticals, which are currently zero-rated by Washington.

A joint statement on their “agreement on reciprocal trade” confirmed an

– such as recognising American halal certification and the supply of rare earths, a critical mineral used in advanced technological applications – to bring down the initial 25 per cent tariff.

“Malaysia has committed to refrain from banning, or imposing quotas on, exports to the United States of critical minerals or rare earth elements,” said the memorandum of understanding on the issue of critical minerals.

Under the memorandum, Malaysia will ensure no restrictions are placed on the sale of rare earth magnets to American companies.

Malaysia has also pledged to expedite the development of its critical minerals and rare earths sectors in partnership with US firms, including granting extended operating licences to create business certainty for increased production capacity.

Malaysia has rare earth deposits of more than 16 million tonnes that are worth an estimated RM1 trillion. It currently supplies around 13 per cent of the global demand for critical minerals, a figure that includes rare earths. Rare earth ore mined in Malaysia is currently exported to China as Malaysia lacks the requisite technology to process it.

Washington has made the pursuit of rare earths a key component of its national security strategy, as China dominates their production and has used this to its advantage in responding to the trade war initiated by Mr Trump.

Rare earths are used in a wide range of technological equipment from mobile phones and power generators to defence technology.

Since trade negotiations between Malaysia and the US kicked off in April, Malaysia has already increased its purchase of American gas and tightened controls on “origin washing” and movement of artificial intelligence chips – curbs aimed at clamping down on Chinese evasion of trade sanctions.

However, Datuk Seri Anwar has said that interference with national economic policies such as the longstanding and politically sensitive equity quotas for bumiputeras – a term used to collectively refer to its Malay majority and indigenous tribes – was a “red line”.