China pressures Malaysia and Cambodia to explain US trade pacts

Beijing pressures Malaysia and Cambodia over US trade pacts

China has lodged formal complaints with Malaysia and Cambodia over new trade agreements the two countries signed with the United States, sharpening a contest for influence in Southeast Asia. Officials from China’s Ministry of Commerce met Malaysian counterparts in Beijing this week and Cambodian officials earlier to convey grave concerns and to urge both governments to weigh the deals against their long term interests. The pushback highlights how Washington’s bilateral trade bargains, which blend market access with security clauses, now run headlong into Beijing’s economic footprint across the region.

At issue are provisions that encourage Malaysia and Cambodia to align with US national security rules. The agreements promote closer cooperation on export controls and sanctions covering sensitive technologies, call for tighter screening of high risk investments, and commit both countries to stop companies from helping third parties bypass US restrictions. They also aim to expand defense related trade and information sharing with the United States. In return, Washington offered tariff relief and preferential access that both economies want as they try to shield exports from steep US tariffs.

The tensions come as Southeast Asian governments try to maintain commercial ties with China while preserving access to the US market. China is the largest trading partner for most countries in the region and a major investor in factories, railways, ports, and digital infrastructure. The United States is the top destination for many of their exports. That mix has created a delicate balancing act, where policy choices in trade are increasingly inseparable from national security and industrial strategy.

What is inside the US deals

Malaysia and Cambodia finalized their agreements during a visit by US President Donald Trump to Kuala Lumpur last month, alongside framework talks with Vietnam and Thailand. The agreements differ in some details but share core elements that tie trade benefits to economic security cooperation and enforcement against sanctions evasion.

Economic security alignment

Both countries agreed to coordinate more closely with US export controls and sanctions on sensitive technologies, including advanced electronics, telecommunications equipment, aerospace components, and dual use items. The texts commit Malaysia and Cambodia to step up investment screening in risk prone sectors, respond to US requests for information about third country investors, and curb transshipment, the practice of routing goods through a third country to disguise their origin. The aim is to block any channel that could help other governments or firms evade US controls.

Tariffs and market access

To offset potential costs, the United States offered tariff relief. Both agreements include a ceiling on US tariffs of 19 percent for a wide range of Malaysian and Cambodian goods, with exemptions or lower rates for selected items. Malaysia will reduce or eliminate tariffs on some US products and lower others by set percentages. Cambodia agreed to drop tariffs on US food, agricultural, and industrial goods. Purchase commitments feature as well, including pledges to buy more US energy, farm goods, and security equipment. The structure reflects the hard trade bargaining of 2025, when access to the US consumer market became contingent on bespoke bilateral deals.

Enforcement without traditional arbitration

The agreements lack a standard dispute settlement mechanism. If the US determines a partner is not complying, it can take unilateral steps, including restoring higher tariffs. Malaysia’s text leaves a section on rules of origin open for future negotiation, a signal that further limits on the use of Chinese inputs could be added later. This gives Washington leverage to push for stricter sourcing rules if it sees signs of circumvention.

Why China is alarmed

Beijing sees the new deals as a direct attempt to pull Southeast Asian trade policy into alignment with US security goals. Chinese officials worry the measures could be used to restrict Chinese invested companies, cut off access to technologies, and channel regional exports away from Chinese supply chains. The additional cooperation on enforcement, including information sharing and screening of high risk investments, raises the risk that Chinese firms face more checks even when operating in third countries.

After consultations with Malaysia in Beijing, a Ministry of Commerce spokesperson publicly criticized aspects of the Malaysia US deal and urged caution. The spokesperson said the agreement should support regional trade and not undermine China’s interests. The message was unmistakable that Beijing expects partners to safeguard space for economic ties with China even as they seek tariff relief in Washington.

China’s Ministry of Commerce said it had serious concerns regarding certain content of the Malaysia US agreement and called on Malaysia to weigh its long term interests and handle the matter properly, adding that any pact should not harm regional cooperation or China’s interests.

China also pressed Cambodia after Phnom Penh agreed to eliminate tariffs on US goods while pledging cooperation on export controls. For Beijing, Cambodia has long been a close friend, and the fear is that even loyal partners could be nudged to restrict Chinese trade routes or investment channels as a price for keeping access to the US market.

How Kuala Lumpur and Phnom Penh are balancing

Malaysia has tried to position itself as a bridge between Washington and Beijing. The country chairs ASEAN in 2025 and has courted both sides. Malaysia hosts significant investment in semiconductor assembly, testing, and packaging. It has attracted new projects from American and European firms as supply chains diversify away from China. At the same time, China is a vital buyer. Chinese companies imported about 18 billion dollars of chips from Malaysia last year for use in electronics assembled in China, including devices ultimately sold in the United States.

The Trump administration proposed a 24 percent tariff rate on Malaysian goods, later paused but still a threat. That risk motivated intense diplomacy to obtain exemptions and a tariff ceiling. Malaysian officials say they provided point by point clarifications to China on the US deal and emphasized their commitment to deepen trade with Beijing even as they seek predictable access to the US market. As one senior Malaysian official put it earlier this year:

“We cannot choose, and we will never choose between China and the US.”

Cambodia faces a different calculus. The US imposed a 49 percent tariff rate on Cambodian goods this year, a major blow to a garment industry dominated by Chinese owned factories that export mostly to the US. Phnom Penh’s deal with Washington aims to secure exemptions and signal cooperation on enforcement, including export controls and information sharing. Yet Cambodia depends heavily on China for financing and investment. It has sought Chinese support for major infrastructure projects, including the Funan Techo Canal, and China remains its largest creditor. That reliance makes Cambodia sensitive to Beijing’s concerns, even as it courts tariff relief from the United States.

Xi Jinping’s regional tour and competing courtship

China moved to shore up ties just as the new US tariffs and side deals shook confidence across Southeast Asia. In April 2025, President Xi Jinping visited Vietnam, Malaysia, and Cambodia, signing dozens of cooperation agreements spanning infrastructure, supply chains, digital economy, agricultural trade, and green technology. In Malaysia, the two sides expanded cooperation in services trade and industrial parks and revived discussions on Belt and Road projects. In Cambodia, leaders discussed financing and investment with a focus on large scale infrastructure and tourism. In each stop, Xi urged resistance to unilateral protectionism and presented China as a stable, long term partner.

The tour underscored a two track race. The United States is using targeted tariff relief and security aligned trade terms to lock in partners. China offers market access, investment, and infrastructure that bind regional economies more tightly to Chinese supply chains. Both approaches appeal to different pressures facing Southeast Asian leaders, from job creation and export stability to political autonomy and security.

Supply chains, transshipment and rules of origin

US officials want to shut down loopholes that allow goods to enter the US market while dodging controls on Chinese inputs. One focus is transshipment, where products made largely in China are minimally altered or rerouted through a third country and then shipped onward. The Malaysia and Cambodia agreements call for stricter customs checks and cooperation to prevent such practices. The open rules of origin section in Malaysia’s deal is especially important. Rules of origin are the criteria that decide whether a product qualifies for preferential tariffs based on where it is made and what it contains. If the US later tightens these rules to limit Chinese content in Malaysian exports, manufacturers could be forced to rework supply chains, swap suppliers, or move more production stages out of China.

Semiconductors illustrate the challenge. Malaysia is a global hub for chip packaging and testing. These are essential steps that can transform components into finished chips. The US worries that some flows could help China absorb components that are subject to controls or that the final products embed Chinese content that should not qualify for reduced US tariffs. Companies in Malaysia now face a dual compliance task, keeping goods eligible for US preferences while avoiding penalties for any linkages that violate US controls. Cambodia’s export base is less complex, but the same logic applies to textiles, footwear, and consumer goods, where US authorities have already tightened scrutiny of country of origin claims.

What ASEAN wants and the risk of escalation

Regional leaders have called for predictable rules and restraint. ASEAN governments warned that abrupt tariff changes can disrupt investment decisions, slow growth, and destabilize supply chains built over decades. Malaysia’s prime minister used ASEAN chairmanship this year to press for unity and deeper integration, arguing that collective action helps absorb shocks. Many governments are also pursuing diversification, seeking more trade with the Middle East, Europe, and within ASEAN to offset exposure to any single market.

Even so, hard choices are piling up. Vietnam pledged stricter oversight to curb illegal transshipment. Thailand is racing to preserve access to the US market through its own talks. Indonesia has weighed higher duties to protect local manufacturers from a surge of low priced imports. Each move risks friction with one major partner or the other. The China Malaysia and China Cambodia consultations this month show how quickly economic policy is becoming a venue for strategic pressure.

Who gains and who loses in the near term

The US deals bring immediate opportunities for some sectors. American farmers are poised to benefit from purchase commitments and lower barriers in Malaysia and Cambodia. Energy suppliers and defense manufacturers also stand to gain from new procurement pledges. For Malaysia, some exporters may capture market share as importers look for sources outside China to avoid US duties. The medical glove industry is one example. Buyers facing a 145 percent tariff on Chinese gloves could still find Malaysian products viable even with a base tariff rate on the US side, which would keep orders flowing to Malaysian producers.

Other industries face turbulence. Cambodian garment factories, many owned or operated by Chinese firms, have been hit by the high US tariff rate. Some may pivot to China’s market or to Europe, while others could cut capacity. In Malaysia, any future tightening of rules of origin would force electronics and machinery makers to adjust sourcing away from Chinese inputs, adding costs and complexity. Small and medium sized businesses across the region report pressure from cheaper imports redirected from China after US tariffs raised barriers, which has already led to plant closures in parts of Thailand and layoffs in Indonesia’s textile industry.

Scenarios to watch in the months ahead

Several developments will show whether the latest friction hardens into a broader economic split or settles into a managed contest.

• Details on Malaysia’s rules of origin. Any new thresholds on Chinese content in Malaysian exports would ripple through electronics and machinery supply chains.
• Enforcement actions tied to transshipment. Closer customs cooperation could raise compliance costs and slow shipping schedules, especially for textiles and consumer goods.
• China’s economic diplomacy. Financing decisions on projects such as Cambodia’s Funan Techo Canal and new industrial parks will signal how aggressively Beijing supports partners facing US tariffs.
• US tariff decisions. Whether Washington extends exemptions or raises duties for partners that do not meet enforcement expectations will determine the value of these deals.
• Corporate investment moves. New plant announcements or delays in sectors like chips, solar components, and automotive parts will reveal how firms read the policy risk.
• ASEAN coordination. Joint steps on customs data sharing and standards could help members manage pressure while keeping regional trade humming.

Key Points

• China lodged formal complaints with Malaysia and Cambodia over their new US trade agreements, citing serious concerns and urging both to weigh long term interests.
• The US deals pair tariff relief with commitments to align with US export controls, sanctions, investment screening, and enforcement against transshipment.
• Washington capped tariffs at 19 percent for many Malaysian and Cambodian goods, offered exemptions for selected items, and secured purchase commitments.
• The agreements lack traditional dispute settlement, giving the US latitude to reimpose higher tariffs if it finds noncompliance.
• China’s Ministry of Commerce warned the Malaysia US deal should not harm regional cooperation or China’s interests, and sought clarifications from both countries.
• Malaysia is trying to maintain neutrality while protecting access to the US market and preserving deep trade ties with China, especially in semiconductors.
• Cambodia seeks US tariff relief but remains reliant on Chinese financing and investment, making it sensitive to Beijing’s concerns.
• Key watch items include rules of origin for Malaysian exports, enforcement against transshipment, China’s project financing, and any new US tariff actions.