US tariff unlikely to trigger recession, but may dampen growth - Tengku Zafrul

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said that while the impact may not be severe enough to trigger a recession, the country would experience slower-than-expected growth.

This would be in line with Bank Negara Malaysia's (BNM) recent revision of its 2025 gross domestic product (GDP) forecast from 4.5-5.5 per cent to 4.0-4.8 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 when asked about how soon the impact can be seen following the tariff implementation.

Tengku Zafrul was speaking to the Malaysian media at the Malaysia Pavilion during the World Expo Osaka 2025, here today.

He said both Malaysia and the US have agreed on key terms of a reciprocal tariff agreement that comes into effect today, Aug 8.

He said the deal covers six main chapters and has already received input from Malaysia, with the final joint statement now pending confirmation from the US side.

"A lot of frontloading happened. A lot of companies actually brought in or bought stocks and even finished goods. So that means some of the companies are able to take the hit rather than pass it to the consumers.

"But 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 said.

If suppliers or producers cannot absorb the increase, they will have to pass it to buyers.

"Can the buyers afford it? Maybe they can, but they will not buy as much. So, this is the knock-on effect on the economy, but that is in theory, and we will see," he said

He said Malaysia remains competitive compared to regional peers, with the average tariff levels not far off from countries like Taiwan (20 per cent).

However, he noted the scale of the US economy, which accounts for nearly 27 per cent of global gross domestic product, hence any slowdown there will have far-reaching consequences.

"Some countries may be hit harder than others, depending on how open their economies are and how heavily they depend on trade with the US," he added.

On former Prime Minister Tun Dr Mahathir Mohamad's claims about Malaysia's tariff negotiations with the US, Zafrul said it was his and the ministry's responsibility to provide accurate information to all parties.

"I believe it is our duty as the government to present the true picture of the tariff situation.

"We have already issued a statement previously. And yesterday, I also corrected the inaccurate facts (raised by Dr Mahathir).

"Perhaps he got the wrong information source... we are just there to correct the facts," he added.

-- BERNAMA