South Korea and Malaysia Finalized Trade Agreement
Manufacturers of electric vehicles and steel products will benefit from eliminated or reduced import tariffs.
Updated on Oct. 3, 2026 in International Trade
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South Korea and Malaysia have reached a final agreement for a free trade deal that resumes negotiations suspended in 2019. The pact removes or cuts tariffs across key industrial sectors, including automobiles, parts, and various steel products.
Why it matters
The agreement aims to bolster supply-chain stability for critical raw materials like urea and bio-based inputs. By securing more favorable tariff conditions, companies operating in both nations can lower cross-border costs for high-value components.
Bilateral trade between the two nations is projected to reach $27 billion in 2026, rising to over $30 billion by 2027. The agreement eliminates 10 percent tariffs on vehicle parts and reduces levies on specific hybrid, diesel, and electric vehicle imports.
The players
Lee Jae-myung
President of South Korea who serves as the nation's head of state.
Anwar Ibrahim
Prime Minister of Malaysia who directs the nation's economic and trade policy.
The details
The trade pact abolishes existing 10 percent tariffs on completely knocked down vehicle parts and eliminates duties on essential chemical products like polyethylene. Additionally, tariffs on 12 steel products will drop from 15 percent to 10 percent, while nine other steel categories will see a total removal of 5 percent tariffs. Most agricultural and forestry products were excluded from the liberalization terms to protect domestic markets.
Timeline
Negotiations were suspended in 2019.
Bilateral talks resumed in 2025.
The agreement was formally concluded on September 28, 2026.
Bilateral trade is projected to exceed $27 billion in 2026.
Trade volumes are expected to surpass $30 billion in 2027.
Market Landscape
The conclusion of this bilateral deal follows a broader trend of South Korea seeking to secure supply-chain stability through targeted international partnerships. This pact builds upon the diplomatic engagement occurring at the Korea-ASEAN Summit.
Operators in the automotive, steel, and chemical sectors should monitor for specific effective dates to adjust their landed cost calculations. Businesses relying on supply chains between these two markets should review their logistics contracts to capture the new tariff-free rates.
The takeaway
This agreement signals a major shift toward lower input costs for regional manufacturers working in the automotive and chemical sectors. Businesses should evaluate their current import schedules to determine if they can leverage these upcoming duty reductions for their next procurement cycle.
Further reading
Learn more about the current shifts in International Trade.
Source note: This article includes information reported by Pulse.
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