Trade agreements have been shown to reduce trade costs, but their impact on Malaysia's bilateral trade costs needed further investigation. The study analyzed trade arrangements from 2002-2012 and found that all types of trade agreements lowered trade costs. Surprisingly, bilateral free trade arrangements had the highest reduction in trade costs for Malaysia, even though regional agreements were expected to have the most significant impact. The study suggests that Malaysia should focus more on bilateral free trade agreements to further reduce trade costs with its trading partners.