US tariff impact on Malaysia's growth: No recession but slower expansion
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said the impact may not trigger a recession but will dampen growth.
This aligns with Bank Negara Malaysia's revised 2025 GDP forecast of 4.0–4.8 per cent, down from 4.5–5.5 per cent.
'The impact may not lead to a recession, but there is an impact, where growth is achieved but at a lower rate,' he said.
Tengku Zafrul spoke to Malaysian media at the Malaysia Pavilion during the World Expo Osaka 2025.
He confirmed that Malaysia and the US have agreed on key terms of a reciprocal tariff agreement effective today.
The deal covers six main chapters, with Malaysia's input already incorporated, pending final US confirmation.
Sectors like electrical and electronics (E&E) and pharmaceuticals, currently enjoying zero tariffs, face concerns over global demand.
'A lot of frontloading happened. A lot of companies actually brought in or bought stocks and even finished goods,' he said.
Some firms may absorb costs initially, but prolonged effects could force price hikes.
'As the stocks deplete or as the raw materials or the old supply chain knock-on effect comes in, I am not sure whether the companies can absorb the total cost,' he added.
If suppliers pass costs to buyers, demand may weaken, affecting the broader economy.
The US accounts for 15 per cent of Malaysia's trade, with exports hitting nearly RM200 billion in 2024.
E&E makes up 60 per cent of these exports, highlighting the sector's vulnerability.
Malaysia's tariff levels remain competitive, comparable to Taiwan's 20 per cent average.
However, the US economy's size means any slowdown could have global repercussions.
'Some countries may be hit harder than others, depending on how open their economies are,' Tengku Zafrul noted.
On Tun Dr Mahathir Mohamad's claims about tariff negotiations, Zafrul stressed the need for accurate information.
'We have already issued a statement previously. And yesterday, I also corrected the inaccurate facts,' he said.
He suggested Dr Mahathir may have relied on incorrect sources. - Bernama
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