6 days Ago By Business Times
KUALA LUMPUR: Corporate Malaysia's initial impressions on the US tariffs impact show that the majority of firms expect the sweeping reciprocal tariffs to stay and at a relatively high level.Margin pressure is a concern but exists in small pockets, according to ground checks by analysts at Kenanga Investment Bank Bhd (Kenanga IB).The firm scoped in companies with regional exposure, particularly those with US revenue, from various sectors such as manufacturing, technology, glovemaking and plastics and packaging.
Oil and gas sector is seen as a high-tariff casualty, while selected consumer firms could gain from improved bargaining power with goods sourcing from China."Our sample size is small (19 companies), but should lend anecdotal readthrough. They are broadly representative of the sectors we cover," it said.
Kenanga IB categorised the 19 corporates that responded into three categories namely technology sector, manufacturing, including gloves and others which broadly included plastics and packaging, automotives, oil and gas related companies.On April 2, US president Donald Trump announced stiff reciprocal tariffs on scores of countries, including Malaysia which was slapped with 24 per cent.With financial markets crashing, Trump subsequently did a U-turn by pausing implementation of the duties for 90 days on all affected countries except China, which has been punished with a 145 per cent tariff for "showing disrespect".
China had since retaliated with a 125 per cent tariff on US imports.Kenanga IB said some segments in technology, specifically EMS segment players, are reporting improved customer enquiries amid the tariff jitters, with the same echoed by glovemakers, spelling some emerging opportunities amid the weak market sentiment."Domestic sectors that are seen most insulated to tariff risks include telco, utilities and healthcare.
As for the more cyclical sectors, we performed some scenario analysis within, and remain comfortable with our 'Overweight' in banks and construction," it added."From our small sample, one bright spot in the room is the tech sector, where firms are experiencing more enquiries."This includes names in the EMS field, presumably in our view as the cost of doing business and the relatively lower tariff (for Malaysia at 24 per cent) in combination still stacks competitively, leading for enquiries of additional or spare manufacturing capacitiy," it added.
Some segments in technology, specifically EMS segment players, are reporting improved customer enquiries amid the tariff jitters, with the same echoed by glovemakers, spelling some emerging opportunities amid the weak market sentiment."Domestic sectors that are seen most insulated to tariff risks include telco, utilities and healthcare. As for the more cyclical sectors, we performed some scenario analysis within, and remain comfortable with our 'Overweight' in banks and construction.
"Additional business enquiries were also echoed in the glove/manufacturing segment. On the other end of the spectrum, some plastics and packaging companies have reverted with seeing less business enquiries this year," it said.The firm thinks that there is some credence in the view that the reciprocal tariffs, while high at 24 per cent and kicked in on April 9, still confers a competitive position or not being worse off than the jonesses.
Only 15 per cent of the respondents (three replies) had said that the reciprocal tariffs would cause their business to be worse off from a competition standpoint, Kenanga IB said.The firm explained that margins risk may arise for instance if the importing customers in the US require Malaysian exporters to help absorb part of their import tariffs (presumably if it was difficult to fully pass on the cost to the US end-consumer).Another potential reason to look at margin slippage risk is also for the fact that US buyers may also adopt a wait-and-see approach for any potentially lowering of tariffs, which may temporary cause some pause in orders.
In this regard, some of the corporates are watching for margins risk, although gloves/manufacturing category firms mostly have lesser concerns over this area.Faced with tariff threats, most corporates respond that they are digging deeper to focus on efficiency."Early days yet, and none of respondents are mitigating by diverting manufacturing base, but the alternative of refocusing on other markets is one such strategy firms are beginning to explore.
"In our findings, some Malaysian corporates are actively seeking out new customers including in China (for goods used to be supplied by the US)," Kenanga IB said.Malaysia tariffs are generally low in this region of 24 per cent versus the likes of Vietnam (46 per cent) and Thailand (36 per cent), it noted."Separately, from our channel checks, some corporates have pointed out that while the Philippines may enjoy a lower reciprocal tariff of 17 per cent, other considerations favouring Malaysia include being relatively free of natural disasters," it added.
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