Malaysian glove makers to gain from further US tariff hike on China

Malaysian glove makers are expected to benefit should the United States (US) President Donald Trump act on his threat to impose an additional 50 per cent tariff on Chinese goods if China does not withdraw its retaliatory tariff, said CIMB Securities Sdn Bhd.

In a note, the firm said the potential additional 50 per cent tariff could lead to three possible scenarios, namely bullish, base, and conservative scenarios, as it is estimated that Malaysia accounted for 45 per cent of the global glove market in 2024, followed by China with 28 per cent.

"Should the Trump administration proceed with the additional 50 per cent tariff on Chinese imports, we believe all three scenarios bode well for Malaysian glove makers, as they enhance the competitiveness of Malaysian exports to the US relative to Chinese producers.

"This view is based on Malaysia currently facing the lowest US reciprocal tariff rate of 24 per cent among key glove-producing countries (China: 34 per cent, Vietnam: 46 per cent, Thailand: 36 per cent, Indonesia: 32 per cent, Cambodia: 49 per cent)," it said.

Nevertheless, CIMB Securities said that while higher tariffs on Chinese gloves may drive US demand towards Malaysian gloves, this advantage may be offset by Chinese manufacturers shifting their focus to other markets, thus intensifying competition in non-US markets.

"Furthermore, we expect US buyers to adopt a cautious approach in response to policy uncertainty and cost volatility, potentially leading to softer demand and lower purchase volumes," it noted.

The firm has maintained a "neutral" rating on the rubber glove sector, given the weak near-term outlook and looming uncertainties in its operating environment.

"Our top picks are Kossan Rubber Industries Bhd ('buy'; target price (TP): RM1.20) and Supermax Corporation Bhd ('buy'; TP: RM1.05)," it added.

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