US Urging Malaysia to ‘Secure’ Sensitive Tech Exports, Malaysian Official Says
The U.S. is continuing to push Malaysia to strengthen its guardrails around sensitive American technologies at risk of being diverted to China, a top Malaysian trade official said this week. He also acknowledged that Malaysia and other Asian countries could soon be pressured to choose between either partnering economically with Washington or Beijing.
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Tengku Zafrul Aziz, Malaysia’s minister of investment, trade and industry, said recent talks with U.S. officials have mainly focused on “economic security” issues, including export controls on sensitive technologies. “They want to know whether the technology that is being exported, the technology is secure in terms of the rights toward the technology,” Aziz said during a public event this week hosted by the Chatham House think tank.
Aziz said Malaysia is trying to “ensure that technology safeguards are in place,” specifically mentioning semiconductors. He noted that the country exports a significant amount of chips to the U.S., and many American-headquartered multinational chip companies have offices in Malaysia, including AMD and Intel.
Aziz in March said the U.S. asked Malaysia to more closely track shipments of advanced semiconductors, including chips made by U.S. firm Nvidia, to make sure they’re not transiting the country before ending up in China in violation of U.S. export controls (see 2503270019).
“We understand their concern is more on the supply chain and on economic security,” he said of the U.S. “Maybe there are issues about the supply chain and ensuring that the supply chain is secure, especially in technology.”
He said Malaysian companies’ “number one concern” right now is the “uncertainty” caused by its trading relationship with the U.S. “It's very hard to plan investment, plan exports, plan everything,” Aziz said. “They want us to engage the United States.”
Asked by the event’s moderator whether the rising U.S.-China tensions could soon force Malaysia to choose between the two countries, or whether it will need to develop a “different model that isn't so reliant on both the US. and China going forward,” Aziz said: “I think it’s a combination of both.”
Malaysia has begun diversifying its trading partners within the last five years to “mitigate that risk,” Aziz said, noting that the country has recently made progress on new free trade deals with the EU and the United Arab Emirates. He said Malaysian trade with the U.S. and China is “declining” relative to its trade with other countries. “So it shows that our diversification strategy is working.”
He said that diversification could help shield Malaysia from more trade disruptions.
“One cannot deny the fact that sometimes people assume that Malaysia or Singapore or any third country will have to make a choice between the United States and China,” Aziz said. “But let me say this -- in my negotiations with the U.S., there's never been one case where the U.S. said you have to choose.”
Other panelists during the event analyzed how Beijing may respond to more trade friction with the U.S. Yu Jie, a senior research fellow on China with the Chatham House’s Asia Pacific program, said China likely will remain “defiant” and continue imposing “maximum pressure” against the U.S. in response to further tariffs or other trade restrictions. That's likely to include “very stringent export controls” on critical minerals, Yu said, “which is something that Beijing knows it has the upper hand in.”
She’s also expecting China to “carefully examine” trade deals negotiated between the U.S. and other countries for “any elements that would actually harm China's interest.” U.K. policy researchers earlier this month said language in the recently announced trade framework with the U.S. calls on Britain to comply with certain supply chain security requirements, which they said the U.S. could use to pressure the U.K. in its trading relationship with China (see 2505140036).
If other countries agree to impose certain restrictions against China as part of a trade deal with the U.S., Beijing “will go after that third country,” Yu said, “and particularly to make those companies doing business with China [have a] more difficult [time of it], and have more stringent rare earth mineral controls as well.”
Yu said this is part of a new approach that Beijing “learned” from the first Trump administration.
“What Beijing has learned from Donald Trump’s first term is to offer that sense of maximum pressure to your opposition,” she said. “So what Beijing has done is actually borrow the playbook from Donald Trump himself, and give the maximum pressure [on] the United States in order to make Donald Trump and his fellows come to the negotiation table.”