KUALA LUMPUR: President Donald Trump's reciprocal tariffs could have a significant impact on Malaysia's glove industry and the US healthcare sector that depends on its products.
RHB Investment Bank Bhd (RHB Research) said Malaysia is among the key players named by the United States Trade Representative (USTR), raising concerns about how this new trade policy will affect its exports, particularly in industries where Malaysia has a strong presence, such as rubber gloves.
It noted that a key question is whether Malaysia's glove products, which are widely exported to the US, will be subjected to the reciprocal tariffs.
"While things remain fluid at this juncture, we are of the view that the consequences could be far-reaching, affecting not only the glove manufacturing sector but also the broader healthcare industry in the US that relies on these products," it said in a note today.
According to RHB Research, the highest import tariff threshold, should the Trump administration consider imposing it on Malaysia, is 50 per cent.
The firm said this is based on China's post-tariff average selling price (ASP) of US$30 compared to Malaysia's current ASP of US$20 before tariffs.
"Assuming the Trump administration imposes a 25 per cent import tariff on Malaysian gloves, the ex-tariff price would be US$26 (from the current ASP of US$20-US$21).
"At US$26, Malaysia products are still US$3-US$4 cheaper than the China-made product of US$29-US$30.
"Anything beyond 50 per cent would make Malaysian gloves ex-tariff ASP more expensive than China gloves which, in our view, could have a detrimental effect towards Malaysian glove makers," it noted.
US President Donald Trump has declared April 2 as "Liberation Day," marking the White House's implementation of what he calls reciprocal tariffs on countries with which the US has a trade deficit.
Analysts have flagged the reciprocal tariffs as a key risk to Malaysia's economic outlook, despite Bank Negara Malaysia's (BNM) upbeat economic projections.
Meanwhile, RHB Research noted that Malaysian glove makers had collectively guided for a sequential decline in sales volume for the first quarter of 2025 (1Q25), coinciding with the threat of losing market share in the European Union (EU).
This comes as China, facing trade restrictions in the US, shifts its focus to non-US markets, a move expected to pressure Malaysian manufacturers' profitability.
Despite these headwinds, RHB Research believes that Malaysian glove makers will remain profitable.
"This is due to ongoing efforts in employee rightsizing and the easing of raw material costs (starting in March), which should enable glove companies to post stronger results in 2Q25 after the inventory-destocking cycle," it said.
Overall, the firm has upgraded the rubber products sector from "Neutral" to "Overweight," citing compelling valuations and expected inventory restocking by the second half of 2025 (2H25).
However, it noted that key risks remain, including a decline in glove ASPs, slower-than-expected capacity expansion, a lower-than-expected utilisation rate, and higher-than-expected raw material prices.
"We continue to favor glove manufacturers with strong earnings visibility, a solid balance sheet, and higher sales exposure to the US.
"With that, we prefer Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, and Riverstone Resources Sdn Bhd due to their above-peer margin performance, unique exposure to cleanroom gloves, and consistent dividend payouts," it said. - NST
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