Trump tariffs: Anwar says no recession expected for Malaysia, ASEAN to coordinate united trade response

KUALA LUMPUR: Malaysia will not face a recession despite being hit by United States President Donald Trump’s new tariffs, according to Prime Minister Anwar Ibrahim. 

“For now, let me reassure you that the government does not foresee a recession in Malaysia,” Anwar said in a nine-minute video addressing the US tariffs posted on his social media accounts on Sunday (Apr 6).

However, the Malaysian prime minister said he considers the recently announced tariffs a “major threat” to the current global trade and investment system. 

From Apr 5, every Malaysian product shipped to the US will face at least a 10 per cent duty and from Apr 9, most products will face a 24 per cent rate, with some exemptions. 

Anwar, who is also Finance Minister, emphasised that his government will not introduce retaliatory tariffs and that Malaysia’s macroeconomic foundations remain strong, including its “robust household spending, strong domestic investment (and) healthy tourism receipts”.

“We will of course be able to weather this challenge from a position of strength and preparedness,” he said. 

He also said that, if the 24 per cent tariff were implemented, the economic growth forecast of 4.5 per cent to 5.5 per cent for this year would need to be reviewed. 

Malaysia, as the chair of the Association of Southeast Asian Nations (ASEAN), is also coordinating a response with other regional leaders “to engage constructively” with the United States as  ASEAN countries are among the hardest hit by the sweeping tariffs, Anwar said.

MIDDLE TO LONG-TERM IMPACT OF TARIFFS WILL BE “CHALLENGING”: ANWAR

However, as an open trading nation, the Malaysian government sees the “unilateral decision” on the reciprocal tariffs as a rejection of the “principles of free, non-discriminatory, predictable and open trade” under the World Trade Organisation (WTO). 

“It strikes at the heart of Malaysia’s identity as a proud non-aligned trading nation, affecting the livelihoods and economic security of countless Malaysians who depend upon open and fair access to international markets,” the prime minister said. 

Anwar acknowledged that as a major destination of US-based foreign direct investments, the middle to long-term impact will be “challenging”. 

This is as the new tariffs will adversely impact many Malaysian industries, including textiles, furniture, rubber and plastics, he said.

Anwar stressed that the government understood the concerns, anxieties and difficulties faced by workers, manufacturers and businesses in these sectors.

COORDINATED ASEAN RESPONSE

The Malaysian leader also noted that Malaysia will engage constructively with the US to protect vital market access, preserve investor confidence and secure fair outcomes for its exporters, after “consulting” his ASEAN colleagues. 

Anwar said this as he “refuted” Washington’s claims that Malaysia has imposed a 47 per cent tariff on US imports into Malaysia, which he said is “fundamentally flawed” and has resulted in Malaysia receiving the 24 per cent reciprocal tariff. 

“Yet our response will be calm, firm and guided by Malaysia’s strategic interests and the common resolve of all our ASEAN colleagues,” he said, emphasising that Malaysia is not looking at introducing retaliatory tariffs.

“Malaysia, as ASEAN chair, will continue to coordinate efforts to present a united regional front, maintain open and resilient supply chains and ensure that ASEAN’s collective voice is heard clearly and firmly on the international stage,” Anwar said in the video on Sunday.

Singapore’s Trade and Industry Minister and Deputy Prime Minister Gan Kim Yong and Indonesia’s Coordinating Economic Affairs Minister Airlangga Hartarto have also similarly said that their respective countries will not impose retaliatory tariffs on the US and will instead negotiate and engage with the US.

Meanwhile, Anwar also had talks on the tariffs on Sunday with Indonesian President Prabowo Subianto, who made a quick visit to Kuala Lumpur. 

A full study on the impact of the US tariffs on several export sectors will be submitted by Malaysia’s Ministry of Investment, Trade and Industry within the coming week while its minister, Tengku Zafrul Aziz, will be holding a virtual meeting with all ASEAN economic ministers on Thursday to discuss a coordinated regional response.

On Sunday,  the Malaysian leader also had discussions with Vietnamese Prime Minister Pham Minh Chinh in a virtual meeting and agreed to focus on negotiations and avoid conflicts in achieving a fair resolution. 

During the call, Chinh also highlighted Vietnam’s efforts in discussions with the US, including a recent conversation between Party General Secretary To Lam and Donald Trump himself on Apr 4, which Anwar said was highly valued. 

According to local news agency Bernama, the discussion on Apr 4 focused on resolving obstacles and promoting economic and trade cooperation towards fair and sustainable trade that balances the interests of all parties.

On Friday, Anwar also held a phone conversation with leaders of various ASEAN member states, including Indonesia, the Philippines, Brunei and Singapore, to “exchange views and coordinate a collective response” to the tariffs.

In a separate Facebook post on Friday, the Malaysian leader said that he had spoken to Singapore’s Prime Minister Lawrence Wong, Brunei Sultan Hassanal Bolkiah, Indonesia’s President Prabowo and Philippines President Ferdinand Marcos Jr.

“As the chair of ASEAN, Malaysia remains committed to fostering consensus among member states and upholding the principles of fairness and equity in all trade negotiations, including in ASEAN-US dialogue frameworks,” Anwar said on his social media.

NO STONE UNTURNED: TRADE MINISTER TENGKU ZAFRUL

At a press conference on Monday (Apr 7), Tengku Zafrul said that the government is putting in place strong measures to address the implications of the tariffs, without taking any retaliation action against US goods for now. 

“We will leave no stone unturned in considering all options to ensure the well-being of our industries, businesses and people,” he said, as quoted by local news agency Bernama. 

Tengku Zafrul also stressed that Malaysia did not agree with the basis on which its tariff was calculated and that it would be looking for further information on the matter. 

“We don't agree with the basis for calculating this tariff, and we are seeking clarification,” he said at a press conference, as quoted by local media platform The Edge.

Like Anwar, Tengku Zafrul denied claims that the country imposed a 47 per cent tariff on US goods, saying that the actual average tariff applied to US imports into Malaysia is 5.6 per cent. 

Besides the impact study focusing on key export sectors which Anwar announced earlier, Tengku Zafrul said that his Investment, Trade and Industry Ministry will also be establishing a Task Force on ‘Managing US Tariffs’ aimed at gathering feedback from key stakeholders, including representatives from the private sector. The impact study will be submitted to the National Geoeconomic Command Centre chaired by Prime Minister Anwar while the task force seeks to minimise the impact of the US measures on Malaysia’s exports and investments, he said, as reported by Bernama.

“Tomorrow, MITI (the trade ministry) will be meeting representatives of industry chambers and export associations, as well as engaging with relevant ministries and agencies such as the Ministry of Finance, (central bank) Bank Negara Malaysia, Malaysia’s External Trade Development Corporation, (the) Malaysian Investment Development Authority and the Department of Statistics Malaysia,” Tengku Zafrul said.

In addition to the virtual ASEAN meeting which he will be chairing on Thursday, Tengku Zafrul also mentioned that the regional leaders are scheduled to meet physically to discuss the member states’ way forward and to mitigate potential disruptions to regional trade, supply chain networks and cross-border investments. 

Malaysia will also continue high-level strategic engagement with the US through leveraging the Malaysia-US Trade and Investment Framework Agreement, he said.