Hoping for tariff relief

PETALING JAYA: The US administration’s sectoral tariffs on timber and wood-based furniture is set to impact Malaysian exports there, but analysts are hoping the proposed reciprocal trade deal with the White House will see some relief from the segment and others.

US President Donald Trump has expanded the scope of his reciprocal tariffs to furniture and related wooden products and starting Oct 14, a 10% tariff will apply to imported softwood lumber and timber and 25% to imported kitchen cabinets, bathroom vanities and upholstered wooden furniture.

These rates are set to increase on Jan 1, 2026 to 30% for upholstered wooden products and 50% for kitchen cabinets and vanities.

Malaysia is one of the world’s top-10 exporters of furniture and wood-based furniture to the United States.

From a total of RM9.9bil last year, exports to the United States amounted to RM5.7bil, accounting for 51% of such exports.

In terms of volume, this was followed by Japan, Singapore, the United Kingdom and Australia.

While the tariffs apply to all exports to the United States, analysts hope the proposed trade deal between the United States and Malaysia later this month at the 47th Asean Summit here will provide some relief for the furniture sector.

“Recently, the deputy-secretary general of the Investment, Trade and Industry Ministry, Mastura Ahmad Mustafa, who also serves as the chief negotiator on US tariffs, stated that the ministry is actively engaging with the United States to seek tariff exemptions for various products, including furniture.

“We remain hopeful for a positive outcome but we are not sure of this,” said Desmond Tan, president of the Malaysian Furniture Council. Tan added that both countries share a mutually dependent economic relationship.

Trump emphasised the tariffs are aimed at strengthening the domestic US wood and furniture industries that had now become reliant on imports from nations like China and Canada.

Local exporters have the option to diversify their markets but this will take time.

Malaysian companies could also set up operations in the United States to avoid the tariffs but an industry insider said this would not be easy to do, although major China-based suppliers may do so.

The tariffs also come at a time when the United States economy is showing signs of slowing and the US dollar weakening, all of which is a negative for local furniture exporters.

Tan urged the government to provide support to the furniture industry, which has been severely affected by these tariffs.

“Support measures could include short-term financing, tax relief, equipment upgrades and export market expansion incentives – all of which would help manufacturers navigate this challenging period.”

Vincent Lau, head of equity sales at Rakuten Trade, said since furniture is “not high-tech stuff”, a positive tariff deal between Malaysia and the United States could be possible.

As such, stock investors have their eye on the outcome of the Asean summit scheduled trade deal to provide direction.

“The impact of the tariff is not known yet and the trade deal could change the sentiment of investors. So the furniture stocks on Bursa Malaysia haven’t really reacted too negatively to the sectoral tariffs on furniture that Trump has announced,” he said.

The possibility of Trump rolling back the reciprocal tariffs may be small. Analyst reports suggest he will increasingly depend on reciprocal tariffs as a means to collect revenue for the government should the US Supreme Court rule he exceeded his authority by imposing sweeping tariffs under the International Emergency Economic Powers Act of 1977.

The Supreme Court will hear oral arguments in November and a ruling could be announced soon after instead of the six months or so normally.

Meanwhile, price action wise, larger furniture-based stocks like Poh Huat Resources Holdings Bhd fell five sen to 92 sen while Signature International Bhd eased three sen to RM1.35 on the news. Sern Kou Resources Bhd closed unchanged and untraded at 80 sen while Ecomate Holdings Bhd fell two sen to RM1.45. However, SSF Home Group Bhd rose 3.5 sen to 37.5 sen.

An analyst told StarBiz a muted price reaction is likely as a result of earlier selling seen on the counters following Trump’s first announcement of tariffs in April.

The sector stocks have generally seen selling pressure since then and was sustained in August after he said there would be further sectoral tariffs on indusstris such as pharmaceuticals, semiconductors and furniture following the announcement of the base tariff rates for all countries.

“The sectoral tariffs are definitely going to impact their business and investors’ sentiment in the stocks has already turned negative since Trump imposed tariffs in April.

“In some ways, what we saw in the market is that investors are starting to nibble at stocks like Poh Huat and Lii Hen Industries Bhd on confirmation of the tariffs,” the analyst said.

In these trying times for investors, price action in the sector’s stocks is now driven by “sell on rumour and buy on news” instead of “buy on rumour and sell on news” market behaviour normally seen, he added.