US tariffs could cut Malaysia's GDP by up to 1.2pct, says Zafrul

KUALA LUMPUR: The United States tariffs are expected to reduce Malaysia's gross domestic product by 0.6 to 1.2 per cent compared with earlier projections.

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said this is based on preliminary analysis by the ministry.

"For 2026, GDP growth is also expected to decline slightly compared with 2025, as the impact of the tariffs will be felt throughout the year.

"As for their effect on inflation in essential sectors such as transportation, energy, and food, it is still too early to provide precise and conclusive assessments," he said in a written parliamentary reply.

He was responding to a query by Datuk Dr Richard Rapu @Aman Anak Begri (GPS-Betong) on the ministry's current analysis of the short- and long-term impacts of rising global tariff rates on inflation, local industrial production costs, and consumer prices, particularly in essential sectors such as food, energy, and transportation.

Zafrul said the government remains committed to proactive and integrated measures to minimise the negative effects of the 19 per cent tariff on the nation's economic growth, especially in essential sectors such as food, energy, and transportation, over the medium and long term.

Zafrul outlined several key measures that the government would implement to mitigate these risks.

This includes strengthening cross-ministerial and inter-agency cooperation through a whole-of-government approach, encouraging exporters to fully leverage Malaysia's 18 Free Trade Agreements (FTAs) to diversify and expand their export markets, and continuing industrial reform programmes as outlined under key economic policies to help Malaysian companies enhance efficiency, adopt automation, and improve overall productivity.

"The government is confident that the planned measures will effectively and comprehensively address the negative impacts of the United States' retaliatory tariffs without compromising the people's well-being.

"Ensuring access to essential needs remains the government's top priority in formulating policies and strategic initiatives to deal with this issue.

"At the same time, these strategies will not only strengthen the global competitiveness of local companies but also open new opportunities to expand markets and enhance the resilience of the national economy in facing various unforeseen challenges," he said.

Read More: Here