Growing Concerns Of Recession On Revised GDP In Major Economies, US

By Siti Radziah Hamzah

KUALA LUMPUR, April 6 (Bernama) -- Concerns about a global recession are growing, driven by recent revisions to the gross domestic product (GDP) for the United States (US), Europe, and China, along with Donald Trump’s announcement on Thursday of new reciprocal tariff plans.

China is now expected to be hit harder by this year’s US tariffs than in 2018 when its strained economy grew at the slowest rate since 1990. 

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In March, Beijing announced an ambitious GDP growth target of around 5.0 per cent for this year, but global banks such as Citigroup Inc. reportedly predict that the 54 per cent tariffs on Chinese goods, introduced since the beginning of Trump's second presidential term, could reduce China's GDP growth by 2.4 percentage points in 2025. 

The assessment was made without factoring in any potential offsetting measures. As for the US,  Goldman Sachs estimated that foreign boycotts could shave 0.1 per cent to 0.3 per cent off US GDP in 2025. 

The European Central Bank revised down the European GDP growth by 0.2 percentage points for both 2025 and 2026, but it remains unchanged for 2027.

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The projections were mainly due to downward revisions to exports and, to a lesser extent, to investment. This reflects a stronger impact of uncertainty than previously assumed, as well as expectations that competitiveness challenges will likely persist for longer than had been anticipated. 

According to the US Census Bureau data, China and the European Union accounted for around a quarter of US total imports in 2024 and are in the top three suppliers of US imports along with Mexico.

SPI Asset Management managing partner Stephen Innes said the real wildcards were the second-order effects, namely inflation trends, consumer confidence shocks, and the depth of growth repricing. 

"But make no mistake, this could morph into an economic beatdown of epic proportions, and no region is immune. The silver lining? The US Federal Reserve (Fed) still has dry powder (liquid cash reserves). If conditions worsen, they will be forced to cut (interest rates) and cut hard.

"That would give Bank Negara Malaysia (BNM) the cover to follow suit without igniting undue foreign exchange (FX) volatility. BNM is among the best (central banks) in the region at staying ahead of the curve, and that flexibility is a key advantage," he told Bernama.

Innes said Europe and China would not just sit on their hands either and stimulus measures would likely be forthcoming.

"But here is one thing working in Asia’s favour: the People's Bank of China appears intent on avoiding sharp yuan depreciation. That is a big positive for Asia FX broadly, it signals a desire to anchor regional stability and avoid kicking off another wave of competitive devaluation," he added.

On the ringgit, Innes said the domestic unit would not be the dirtiest shirt in the FX laundry basket. He pointed out that Malaysia’s macro performance has held up well, the central bank is disciplined, and the Malaysian trade negotiators are expected to secure some form of concessions or carve-outs in due time. 

"With the US rate cut expectations now ramping up, the ringgit should find some cushion. That said, let’s not sugarcoat it — this is still a fragile setup. Sentiment can turn fast, and while we may get a bit of calm into the weekend, it’s all about what shows up on the screen next," added Innes. 

Welcome to Phase Two of the Trade War: The China Retaliation — Adapt or Bleed

Are we officially out of the negotiating phase? 

China just torched that playbook, slapping a sweeping 34 per cent tariff across all US imports, effective the day after Trump’s “Liberation Day” duties kick in on April 9.

Innes said the message from Beijing could not be clearer: Retaliation will be broad, fast, and relentless. 

"And just like that, we’re back in a live-fire tariff environment — and markets are reeling.  And it’s not just the size of Trump’s tariff push that’s freaking the market — it’s the breadth and unpredictability," he pointed out. 

Lower ASEAN-6 Growth Forecast to 4.2 per cent in 2025   

Six out of the 10 Southeast Asian countries targeted by Trump were hit with significantly higher-than-anticipated tariffs, ranging from 32 per cent to 49 per cent -- substantially more than the 20 per cent imposed on the European Union.

To date, none of the Southeast Asian nations have indicated plans to impose retaliatory tariffs.

Trump has imposed a 24 per cent tariff on Malaysia. Many have observed that the US tariff imposed on Malaysia is lower compared to most other ASEAN countries.

While this could potentially encourage some relocation to Malaysia if the situation persists, it's important to keep demand destruction in mind — the tariff is still significantly higher than before.

Maybank Securities Pte. Ltd. has revised its GDP growth forecasts for the ASEAN-6 countries. The updated forecast predicts a growth rate of 4.2 per cent in 2025, down from the previous estimate of 4.7 per cent. Additionally, the growth forecast for 2026 has also been adjusted to 4.2 per cent, compared to the earlier forecast of 4.7 per cent

In its ASEAN Economics note, it said export and investment growth would likely be lower than previously projected following Trump's sweeping reciprocal tariff on about 180 countries, including ASEAN. 

The US has imposed higher-than-expected reciprocal tariffs on Vietnam (46 per cent), Thailand (36 per cent), Indonesia (32 per cent)and Malaysia (24 per cent). The Philippines (17 per cent) and Singapore (10 per cent) will face relatively lower tariffs. 

"We have lowered our US GDP growth forecast to 1.7 per cent from 2.0 per cent and China GDP forecast to 4.2 per cent in 2025 from 4.5 per cent," it added. 

Lower Inflation Opens Door for Rate Cuts 

Maybank Securities also trimmed its inflation forecasts for ASEAN-6 to 2.1 per cent in 2025 from 2.4 per cent, and 2.1 per cent in 2026 from 2.5 per cent.  

It said slowing global growth and the displacement of excess capacity, particularly from China, will likely dampen price pressures in ASEAN. It also expects the Fed to cut its policy rate by 50 basis points (bps) in 2025, as the tariffs and other US measures will likely hurt growth and unemployment, outweighing the risks from near-term inflation pressures. 

"The Fed rate cuts and lower ASEAN inflation will open the door for more ASEAN central banks to ease, including Indonesia (-50bps), the Philippines (-50bps), Thailand (-50bps), Vietnam (-25bps) and Singapore in 2025," said Maybank Securities.

It added that fiscal stimulus might be more limited given the higher public debt and deficit positions, except in Singapore.  

-- BERNAMA