Malaysian Rubber Gloves Hit By Tariff But Less Than Peers
The United States has announced new tariffs that will affect the rubber glove manufacturing industry, with varying impacts on key producing countries.
The US is set to impose a 10% tariff on all countries, with higher individualized reciprocal tariffs for countries with which the US has the largest trade deficits.
For countries involved in glove manufacturing, the US reciprocal tariff rates are as follows: China 34%, Vietnam 46%, Malaysia 24%, Thailand 36%, Indonesia 32%, and Cambodia 49%.
There is uncertainty regarding whether the additional 34% tariff imposed on Chinese imports will be applied on top of the earlier announced 70% and 120% tariffs on Chinese glove imports to the US for 2025 and 2026, respectively.
Tariffs on Chinese glove imports to the US were previously established, increasing from 7.5% to 50% under the Biden administration and further to 70% under the Trump administration.
Based on analysis, CIMB Securities believes that the 34% tariff will supersede the additional 20% tariff announced earlier by US President Donald Trump. In this case, total tariffs for Chinese glove makers in 2025 would be 84% (50% [Biden administration] + 34% [Trump’s reciprocal tariff]), which is expected to be positive for Malaysia.
In a bullish scenario where the reciprocal tariff of 34% is added to the additional tariff of 20%, total tariffs on Chinese glove imports to the US would rise to 104% (50% + 20% + 34%). CIMB said this is also expected to benefit Malaysian glove makers.
However, if only the 70% tariff on Chinese glove imports is implemented, superseding the 34% tariff, it is seen as negative for Malaysian glove makers as it would narrow the competitiveness gap between Malaysian and Chinese glove exports to the US.
Overall, the implementation of the higher tariffs is seen as negative for Malaysian glove makers, as these tariffs will raise purchase costs for US-based buyers (thus dampening demand, leading to lower purchase volumes) and increase competition in non-US markets.
However, Malaysia faces the lowest US reciprocal tariffs of 24% among key glove-producing countries (32-49%). This is expected to strengthen the competitiveness of Malaysian glove exports to the US compared with other glove-exporting countries.
US market exposure of glove stocks under coverage is as follows: Hartalega (50% of total sales), Kossan (50% of total sales), Top Glove (24% of total sales), and Supermax (>20% of total sales).
It is believed that the increase in tariffs will promote US domestic manufacturing of nitrile gloves, a critical personal protective equipment (PPE), as the US currently relies heavily on imports to meet the bulk of its supply needs.
As of 2024, there are only three manufacturers of nitrile gloves in the US, meeting just 0.05% of US demand for nitrile gloves in terms of volume.
Among the glove stocks under coverage, CIMB sees SUCB as the key beneficiary of this news, as the first line of its US-based production plant began production in 1QCY25. However, commercial production is expected to begin only in 3QCY25, with three production lines expected to be operational by then.
The rubber glove sector is currently rated as Neutral, with Kossan Rubber and Supermax as top picks. While glove stocks are likely to be in play, the recommended approach is on a trading basis.
