Analysts caution on US-China tariff rollback's effect on glove makers

New Straits Times

13-05-2025

KUALA LUMPUR: Analysts suggest that the recent US-China tariff rollback may not be advantageous for Malaysian glove manufacturers, as the ongoing uncertainty could cause delays in purchasing decisions.
Additionally, it could diminish the relative competitiveness of Malaysia's glove exports to the US compared to those from China.
Maybank Investment Bank Bhd (Maybank IB) noted that a return to the earlier tariff structure on Chinese gloves remains a possibility, depending on how current negotiations unfold.
The firm also cautioned that new production capacity from Chinese glove makers in Southeast Asia, expected to come online from 2026, presents an increasing supply risk that could outweigh any potential gains.
Starting May 14, the US will temporarily cut tariffs on Chinese imports from 145 per cent to 30 per cent, while China will reduce its tariffs on US imports from 125 per cent to 10 per cent.
"The tariff on China glove makers remains unclear. Industry sources suggest an 80 per cent rate, combining the 30 per cent reciprocal tariff for 90 days and earlier Biden-imposed tariffs.
"However, this is unconfirmed, as 30 per cent may not apply to goods with pre-existing high tariffs. The effective rate could instead be the original Biden-imposed rate of 50 per cent," Maybank IB said.
The firm noted that although the temporary tariff rollback may not necessarily make Chinese glove makers more competitive, the ongoing uncertainty could lead customers to hold off on orders, potentially delaying purchases and dampening sales.
More importantly, it added that the anticipated increase in production capacity from Chinese glove manufacturers in Southeast Asia starting in 2026 presents supply risks that could impact both sales volume and average selling prices (ASP).
"While the 50 per cent and 100 per cent tariffs on China-made gloves present an opportunity for Malaysia glove makers to gain market share in the US, they have also led to an overreliance on a single market.
"This growing dependence on the US has come at the expense of non-US markets, where Malaysia glove makers are steadily losing ground to China competitors," it said.
Maybank IB said the situation could worsen as additional capacity from China glove makers in Southeast Asia is expected to come online from 2026, with these facilities targeting a recovery of US market share.
"As a result, Malaysia glove makers may face stiffer competition in the US, while continuing to lose share in non-US markets increasingly dominated by China glove makers," it said.
Maybank IB has downgraded the glove sector to negative from neutral, citing earnings risks due to slower sales.
It mentioned that sales have not seen a significant rebound after the front-loading activities in the fourth quarter of 2024, and the continued tariff uncertainty could further dampen demand.
CIMB Securities stated that given the current market volatility and policy uncertainties, it is likely global glove buyers will continue to adopt a diversification strategy, sourcing gloves from multiple countries and suppliers.
"At this juncture, we believe that US buyers are taking a 'wait-and-see" approach with their purchases owing to price volatility and policy uncertainty, resulting in softer demand and lower purchase volumes for Malaysian glove makers, a situation expected to persist until the end of the first half of 2025," it adds.