东方日报

SERC Media Briefing on Quarterly Economy Tracker (Jan-Mar 2025)

To view the Executive Summary of QET, please follow the link below:

QET 2025Q1: Decoding the Impact of Trump’s Liberation Day Tariffs

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For news coverage, please proceed to Activity page.
https://www.acccimserc.com/activities/activity-20250417

A. WORLD ECONOMIC OUTLOOK UPDATE

The Global Economic Path Ahead is "Rough and Foggy"

• A major global slowdown looms. High frequency indicators suggest that global growth continued in Q1 2025, albeit highly cautious about its near-term direction amid a looming risk of the Trump’s “Liberation Day” tariffs-induced full-blown trade war could push the global economy into a sharp downturn.
   
• Tariffs action and retaliation among major economies have fuelled concerns about a full-blown trade war uncertainty, causing extreme volatility and ripple effects on the financial markets worldwide, oil and commodities markets. Tariffs can severely disrupt global supply chains, increase cost of raw materials and push up consumer inflation, pushing the global economy toward stagflation (low growth and high inflation), and in the worst case, can cause a global recession.
   
• Upside risks to global expectations and monetary policy path. Since 2H 2024, major global central banks have lowered their policy rate amid moderating headline inflation. However, a combination of the US tariffs policy and retaliation actions could also pose upside risks to inflation expectations. Trade tensions, supply chain disruptions, and increased inputs cost may affect consumer prices (due to cost pass-through) not only through the direct effect of increases in import prices, but also indirectly due to increases in the prices of domestically produced goods triggered by higher input costs.
   
• Rising inflation expectations, slowing economic growth and a rise in unemployment would force the Fed to choose between fighting inflation and maintaining a steady labour market. Even though the Fed signalled that it would cut rates twice this year, the Fed Chairman warned that tariff inflation could be more persistent. This could limit the central bank from cutting the rate faster and more, even if the economic growth slows.

B. MALAYSIA ECONOMIC OUTLOOK UPDATE 

Navigating Tariffs Tension-Induced Disruption on Malaysia

• A commendable economic performance in 2024. Malaysia is in a position of strength to face the impact of tariffs, which is expected to widen globally due to Trump’s Liberation Day tariffs on all countries, with China hitting the hardest.
   
• Positive momentum continues in 2025. Bank Negara Malaysia (BNM) has maintained positive economic assessment with GDP growth sustaining at 4.5%-5.5% in 2025. Sustained domestic demand, investment upcycle, and export recovery will be the key drivers. However, the unprecedented tariffs announcement dubbed as Trump’s “Liberation Day” on 2 April has escalated the Trump “Make America Great Again (MAGA)” into a full-blown trade war, with far-reaching implications on global trade flows, economic growth, and global supply chains. Despite a 90-day pause on country-specific tariffs, broad tariff measures, especially the tit-for-tat tariffs of China and the US, would strain global trade and economic growth.
   
• Risks to inflation are tilted to the upside. Headline inflation stood at 1.5% in February 2025 (1.7% in January), with most categories showing stable prices trend. Core inflation edged up to 1.9% (1.8% in January).
   

Decoding Trump’s “Armageddon” Tariffs: What’s the economic impact on Malaysia?

• Tariffs action and retaliation among major economies have fuelled concerns about a full-blown trade war uncertainty, putting the world stock markets on the edge of extreme volatility. It can severely disrupt global supply chains, increase cost of raw materials and push up consumer inflation, pushing the global economy toward stagflation (low growth and high inflation), and in the worst case, can cause a global recession.
   
• Though Malaysia’s average Most-Favoured-Nation (MFN) applied tariff rate was 5.6%; 7.4% for agricultural products and 5.3% for non-agricultural products in 2023, the United States Trade Representative (USTR) has derived that Malaysia is currently applying an average of 47% tariff (includes currency manipulation and trade barriers) on the US goods to Malaysia. This raises eyebrows on the basis of the calculation, and the formula is fundamentally flawed. 
   
• How’s the impact on Malaysia? Malaysia’s external sector will face a daunting challenge ahead given the disruptive impact of the tariffs on supply chains, global demand, and business operational costs. 
   
• We draw comfort that the US authorities said that tariffs can be lowered if any trading partner takes significant steps to remedy the non-reciprocal trade arrangements and align sufficiently with the US on economic and national security matters. Trump said he would be open to negotiating with other countries about the duties.
   
• We welcome the Ministry of Investment, Trade and Industry (MITI)’s stance of not considering retaliatory tariffs, instead will actively engage with the US authorities in addressing the impact of reciprocal tariff.
   
• Pencilling the tariffs shock in this prevailing moderate global growth and heightened global uncertainty, we have revised our 2025’s GDP growth estimate to 4.0% from 5.0% previously to reflect the impact of tariffs on exports and its spillover effect on domestic consumption and investment.
   
• We expect Bank Negara Malaysia will wait to assess the impact of tariffs on economic growth before making any policy decisions, potentially including interest rate adjustments if domestic growth is under threat to below 4% and domestic demand falters.
   

The Star

The Straits Tines

MySinChew

AWANI Pagi: ASEAN Kita | Malaysia and ASEAN face Trump tariff storm

Trump’s tariffs are shaking up ASEAN, but how exactly does it affect you? Join us with Lee Heng Guie, Executive Director, Socio-Economic Research Centre (SERC) to unpack the real impacts on Malaysia and ASEAN’s economy, businesses, and everyday life. Tune in to ASEAN KITA to understand what’s behind Trump’s trade moves and what’s next for the region.

南洋商报

• Barely three months returning to the White House after swearing in on 20 Jan 2025, President Donald Trump has imposed tariffs from universal baseline tariffs to country-specific tariffs on goods from Canada, Mexico, and China, which have sparked retaliatory tariffs. This marks a continuation of his tariff-focused policies from his first term in 2017–2020, reaffirming his administration’s unwavering trade actions to correct trade imbalances and regain the US economic nationalism.

• On 2 April 2025, under the International Emergency Economic Power Act of 1977 (IEEPA), President Trump unveiled a sweeping reciprocal tariffs policy on all countries, with a few exceptions. A baseline tariff of 10% will take effect on 5 April 2025, while selected countries will face a total additional tariffs of up to 50% with effect from 9 April 2025. These tariffs are expected to bring significant shift in global trade, potentially triggering retaliatory actions from affected nations and sparking a full-blown trade war.

• As Malaysia is in the list “Dirty 15” countries that the US has incurred a trade deficit of USD24.8 billion in 2024, the US administration has hit Malaysia an additional 24% tariff on all its goods exporting to the US, which the US that claimed that it is a 50% discount from the implied 47% tariff currently imposed on the US goods into Malaysia.

• As the US was Malaysia’s second largest export destination (13.2% share) in 2024, the direct impact of the US tariffs and also the US’s wider trade tensions with her trading partners will have a knock-on effect on Malaysia’s external sector given the disruptive impact on supply chains, global demand, increase raw materials costs and business operational cost. The impacted industries are electrical and electronic products (excluding semiconductor), machinery and equipment, optical and scientific equipment, rubber products, furniture products, and palm oil.

• Global economic growth is projected to remain steady at 2.8%-3.3% in 2025, supported by favourable labour markets, moderating inflation, and continued monetary policy easing.

• Global inflation is expected to decline further, driven by lower commodity prices and the fading effects of past policy tightening.

• However, this outlook has assumed some level of tariff actions and retaliations among major economies. As a result, higher trade restrictions, geopolitical tensions, and retaliatory measures pose downside risks to global growth.

• The output gap is expected to remain positive in 2025. While potential output is projected to expand at its pre-pandemic rate of 4%-5%, actual output growth could outpace this at 4.5%-5.5%, driven by sustained strength of domestic demand. 

• Over the medium term, potential output will be supported by higher investments and productivity gains, underpinned by the continued implementation of multi-year investment projects and key national initiatives. These include the New Industrial Master Plan 2030 (NIMP 2030), National Semiconductor Strategy (NSS), National Energy Transition Roadmap (NETR), and the upcoming 13th Malaysia Plan (RMK-13).