KUALA LUMPUR (May 13): The US-China tariff deal is seen as negative for Malaysian glove makers, as it makes Chinese gloves cheaper and more competitive, potentially hurting demand for local products.

Starting Wednesday (May 14), the US will cut tariffs on Chinese imports from 145% to 30% for 90 days, while China will lower tariffs on US goods from 125% to 10%, according to a joint statement.

Analysts are unsure of the exact tariff rate on gloves, given the existing 50% US tariff (effective Jan 1, 2025) and a planned increase to 100% in 2026. However, they agree that cheaper Chinese gloves will hurt local glove makers.

Hong Leong Investment Bank (HLIB) expects Chinese nitrile gloves to face an 80% US tariff (50% existing + 30% 90-day rate). It said although these gloves are still costly, cheaper Chinese vinyl gloves may negatively impact Malaysian glove makers.

By its calculations, the tariff cut lowers the landed price of Chinese nitrile gloves in the US from US$44.25 to US$27 per 1,000 pieces, still more costly than Malaysian and Thai gloves at US$17.60–US$18.70.

Vinyl gloves benefit more, with prices falling from US$22–US$24.50 to US$11.70–US$13.00, making them cheaper than Malaysian nitrile gloves.

It said since Chinese vinyl gloves already dominate 70%–75% of the US market and are now cheaper, buyers may prefer them, reducing the demand shift to nitrile gloves — a setback for Malaysian producers.

HLIB downgraded the glove sector to “neutral” but kept a “buy” call on Kossan Rubber Industries Bhd (KL:KOSSAN), with a lower target price of RM2.30.

It remains positive on Kossan due to its focus on product customisation, automation, and strong financials, including a RM1.6 billion net profit.

The firm’s downgrade was also due to an expected delay in supply-demand recovery beyond 2026. This view is supported by China’s largest glove maker Intco Medical’s 2024 annual report, which pointed to two long-term risks for the global glove industry.

HLIB said Intco Medical’s profits have risen, letting them sell gloves cheaper than Malaysian makers. They’re expanding production by eight billion pieces a year and investing heavily. Their use of automation cuts labour costs by 50%, giving them a big cost advantage, especially in Southeast Asia. This may increase supply and put pressure on Malaysian glove makers.

HLIB sees hope for Malaysian glove makers if US buyers switch from vinyl to nitrile gloves, especially if US-China tariff talks fail. Nitrile gloves are higher quality, and this shift could help restore supply-demand balance by 2026.

Maybank Investment Bank (Maybank IB) said US tariffs on Chinese gloves remain unclear — possibly 80%, but could be just 50%. Malaysian gloves face a 10% US tariff until July 8, 2025, then 24% after.

The firm warned that tariff uncertainty may lead buyers to delay orders. More importantly, new Chinese glove production in Southeast Asia from 2026 could increase supply, putting pressure on prices and sales.

Maybank IB has downgraded the glove sector to “negative” and issued “sell” calls on Hartalega Holdings Bhd (KL:HARTA), Top Glove Corporation Bhd (KL:TOPGLOV) and Kossan.

CIMB Securities, expecting an 80% tariff on Chinese gloves, kept a “neutral” outlook on the glove sector due to a weak short-term outlook and ongoing uncertainties like trade policy changes and Chinese expansion.

It said stock prices already reflect a gradual earnings recovery expected in late 2025.

CIMB Securities said since the US raised tariffs on Chinese gloves in late 2024, Chinese producers have shifted to non-US markets like Europe, increasing competition and lowering prices there by 10%–20%.

Due to uncertainty, buyers are spreading orders among different suppliers. US buyers are delaying purchases, resulting in weaker demand and lower sales for Malaysian glove makers, likely lasting until mid-2025.