Storm clouds over trade

The Star

a day ago

Malaysia on display: Tengku Zafrul (in green) with Sarawak Deputy Premier Datuk Awang Tengah Ali Hasan (third from right) looking at the Smart City model at the Malaysia Pavilion, World Expo 2025 in Osaka, Japan.
OSAKA: While the tariffs set by the United States may not trigger a recession, they are nonetheless expected to cause lower growth globally, says Tengku Datuk Seri Zafrul Abdul Aziz.
On weathering the tariff imposed on Malaysia, the Investment, Trade and Industry Minister said the country remains competitive compared to regional peers.
However, he noted that given the scale of the US economy, representing nearly 30% of global gross domestic product (GDP), any slowdown will have far-reaching consequences.
'Some countries might get hit harder than others, depending on how open their economies are, and how big a trading partner the United States is to them,' said Tengku Zafrul, who added that trade with the US accounts for around 15% of Malaysia's exports.
'Our trade with other markets is 85%. Having said that, the United States is our largest export market, exporting close to RM200bil in 2024,' he told reporters after visiting the Malaysia Pavilion at the World Expo 2025 here yesterday.
Tengku Zafrul said Malaysia is already forecasting a lower growth rate for the year, pointing to Bank Negara's new GDP growth forecast.
On July 29, the central bank announced a growth forecast of 4% to 4.8% for Malaysia, a downgrade from the previous projection of 4.5% to 5.5% growth rate.
Tengku Zafrul said another concern would be on whether the tariffs would affect demand for goods.
'As the price goes up, and if suppliers or producers cannot absorb the increase, they will have to pass to the buyers.
'And when you pass to the consumers, can they afford it? Or maybe they can, but they will not buy as much. This is the knock-on effect on the economy,' he said.
On a possible tax to be imposed on Malaysia's semiconductor exports to the US, Tengku Zafrul said his ministry had checked with its counterpart, and no formal decision has been made, with investigations under Section 232 of the Trade Expansion Act against certain Malaysian companies still ongoing.
'There is no executive order signed by the President (Donald Trump). What we have heard so far is just the statement he made during his meeting with the CEO of Apple (Tim Cook),' he said.
Trump had said he planned to impose 100% tariffs on tens of billions of dollars of imported semiconductors used in consumer electronics and other products.
However, he also indicated he would not hit companies that commit to making chips in the United States with this form of tariff.
The Trade Expansion Act allows Trump to impose tariffs or other import restrictions if a product is found to threaten US security.
On another matter, Tengku Zafrul said he has to clarify Tun Dr Mahathir Mohamad's criticisms of Malaysia's recent trade agreement with the United States, not as an act of hitting back at the former prime minister, but to provide a factual account of the matter.
'Perhaps he (Dr Mahathir) got the facts from wrong sources. So I took the liberty to correct it,' he said.
Dr Mahathir, among others, had claimed that Malaysia was removing all taxes from 11,000 US products in return for the reduction in US tariffs imposed on Malaysia.
Tengku Zafrul explained on social media that only 60.4% of the tariff lines will be zero-rated, and not 100% as Dr Mahathir claimed.
The former prime minister also questioned a supposed commitment by Malaysia to supply unprocessed rare earth to the US at a low return.
To this, Tengku Zafrul said that whether it is rare earth or other strategic minerals, there is no exclusive agreement to sell directly to any country, adding that Malaysia's current policy mandates that rare earths must be processed domestically before being exported.
'In this world of misinformation, it is important that we put our version out there, which in this case, is the truth,' he said.