Malaysian Prime Minister Mahathir Mohamad said Tuesday he would not retract his criticism of New Delhi's actions in occupied Kashmir despite the fact that Indian merchants called for an unprecedented boycott of Malaysian palm oil.
The stalemate could exacerbate what Mahathir described as a trade war between the world's second largest producer and exporter of commodities and its biggest buyer so far this year.
The main vegetable oil trade agency in India asked its members on Monday to stop buying palm oil from Malaysia after Mahathir told the UN General Assembly last month that India had "invaded and occupied" Kashmir.
Read: Mahathir hits India for invading and occupying Kashmir
On August 5, the government of Indian Prime Minister Narendra Modi stripped occupied Kashmir of its semi-autonomous status and imposed a curfew and a communications blackout.
"We say what we think and we don't retract or change," Mahathir told reporters outside parliament.
"What we are saying is that we must all comply with the resolutions of the United Nations. Otherwise, what is the use of the UN?"
Mahathir said Malaysia would study the impact of the boycott called by the Association of Solvent Extractors of India, based in Mumbai, and look for ways to address the problem.
New Delhi has so far refused to comment on the trade dispute.
"This is not the Indian government, so we have to discover how we can communicate with these people, because trade is a two-way thing and it is bad to have what amounts to a trade war," said Mahathir.
Malaysia's exports to India were worth $ 10.8 billion in the fiscal year ending March 31, while imports totaled $ 6.4 billion, according to data from the Indian government.
Malaysian palm oil futures fell on Tuesday due to concerns that demand would fall from India.
India was Malaysia's third largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($ 1.63 billion).
Malaysia said last week that it was considering increasing imports of raw sugar and buffalo meat from India, in an attempt to ease trade tensions.
India, the world's largest importer of edible oils, also buys palm oil from Indonesia, as well as soybean oil from Argentina and Brazil, and sunflower oil from Ukraine.