After Trump Tariffs, Malaysia to Ease Price Hikes in Bid to Lift Economy

Plan to cut fuel subsidies may also be delayed or watered down, say officials

- Shannon Teoh

KUALA LUMPUR - Malaysia is set to take a hit to its coffers as uncertainty looms over the impact of the impending US import tariff regime, with Prime Minister Anwar Ibrahim postponing measures such as tax hikes and subsidy cuts in the face of dimming growth prospects.

Higher sales and services tax (SST) rates on a broader basket of items were due to be implemented on May 1. But at the eleventh hour, the Finance Ministry said on April 29 that the expansion to the consumption levy had been postponed as the plan was being "refined".

Meanwhile, several high-ranking government officials told The Straits Times that a closely watched plan to cut subsidies for base-level RON95 petrol—the fuel most commonly used by Malaysian motorists—that was initially scheduled for June is set to be delayed, or be watered down to affect a smaller cohort than the earlier announced top 15 per cent income bracket, or both.

A minister, who asked not to be named due to the confidentiality of Cabinet discussions, admitted that "politically, it is very difficult" to cut fuel subsidies now, given the headwinds from US President Donald Trump's decision to apply tariffs on the rest of the world, which is set to dampen the global economy and send a number of countries into recession.

Although a 24 per cent tariff against Malaysia was announced on April 2, a 90-day pause was put into effect. Datuk Seri Anwar said during a special May 5 parliamentary sitting on the matter that "there is a possibility that the US will reduce the reciprocal tariffs imposed on Malaysia" if ongoing negotiations are successful.

"There is a likelihood that we will not achieve the Budget 2025 projection for GDP growth in 2025, which is between 4.5 per cent and 5.5 per cent," said the Prime Minister, adding that the forecast will be revised after the US tariff policy is finalised.