Tripwire clauses: why is China alarmed by Malaysia’s new trade deal with the US?

China has expressed “serious concerns” regarding a trade agreement signed last month between Malaysia and the United States, and some analysts suggest it might be related to how the pact could force the Southeast Asian nation to align with Washington’s sanctions regime.

The official reaction on Thursday followed a meeting between Chinese and Malaysian commerce officials earlier in the week. While Beijing did not publicly specify the offending clauses, critics point to provisions that ostensibly limit Malaysia’s ability to pursue independent trade deals.

Here is why the agreement, which the White House said seeks “to strengthen their commercial relationship through increased alignment on national and regional economic security matters”, may be raising hackles in Beijing and Kuala Lumpur.

What triggered Beijing’s concern?

At the heart of the dispute are provisions that critics argue compel Malaysia to pick a side in the geopolitical rivalry.

Analysts point to Article 5.3, which allows the US to reimpose higher tariffs if Malaysia strikes a trade deal with any nation deemed to jeopardise essential US interests.

“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,” said Lynn Song, chief economist for Greater China at Dutch investment bank ING.

Such a clause appears to be an attempt to pressure countries into “choosing a side”, which is likely why it has drawn concern from China, Song noted.

What is the ‘alignment’ clause?