PSM urges govt to plan ahead amid global recession fears

Summary

• PSM has called on the government to formulate measures to mitigate an impending global economic recession caused by the US tariffs.

• PSM chairperson Dr Jeyakumar Devaraj says the tariffs’ effects will be felt in a year’s time, and Putrajaya should use the time to prepare.

PSM today urged the government to put mitigation measures in place to prepare for an impending global recession.

In a statement, PSM chairperson Dr Jeyakumar Devaraj said that if US President Donald Trump proceeds with his plan to put tariffs on almost all imports into the US, it will affect the global economy.

“The tariffs collected by US Customs will go to government coffers. The income of US households will not be augmented in any way because of these tariff collections.

“On the contrary, the real purchasing power of US households will decrease by about 10 percent to 20 percent, because prices of goods will increase,” he said.

Jeyakumar pointed out that this decrease in real purchasing power will depress the demand for goods and services produced in the US, and tend to push the US economy into a recession.

He explained that countries selling to the US will also experience recessionary pressures as demand for their goods falls owing to reduced real purchasing power among American consumers.

Jeyakumar said that nations subjected to higher tariffs could see their exports displaced by cheaper alternatives from countries enjoying lower tariff rates, with those facing higher US tariffs consequently experiencing more severe recessionary pressures.

“If a recession unfolds, it probably will occur about one year from now, as it takes time for the negative multiplier effects to kick in. That gives us sufficient time to plan carefully how we in Malaysia can manage this downturn.

“As the PSM stressed during the Covid-induced lockdowns between 2020 and 2021, one of the primary policy goals should be to ensure that no Malaysian is deprived of basic needs - food, housing, health care and education.

“We have more than enough resources to ensure that, but we need to work on a good contingency plan. The PSM calls on the Madani government to take the possibility of a global recession seriously and start working on a contingency plan to deal with it,” he said.

1pct higher tariff after talks

On July 8, the US announced a blanket 25 percent tariff on all Malaysian products exported to the country, effective Aug 1, separate from existing sectoral tariffs.

This is one percent higher than the tariff announced in April.

Explaining Trump’s move, Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz admitted that tariff negotiations with the US are complex and require certain sacrifices.

“However, our goal remains clear - to ensure market access for our exports, modernise our economy, and protect Malaysians’ livelihoods in the long term,” said Zafrul, who led Malaysia's tariff negotiations with the US.

Zafrul stressed that the negotiations should not be viewed as a failure, as discussions and engagements are still progressing constructively.

He said this is not about a failed negotiation or a crisis faced by Malaysia or the world, but rather part of the global trade dynamics.

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