MARITIME SECTOR NOT IMMUNE TO TARIFF WAR, WITH SMALL FIRMS FACING POTENTIAL DEATH BLOW

By Harizah Hanim Mohamed

KUALA LUMPUR, May 11 (Bernama) -- Malaysia’s maritime sector, including its ports, is not immune to the fallout from the tariff war, which can potentially deal a death blow to small companies if the cost of shipping cargo increases exorbitantly.

Well-known maritime industry analyst Nazery Khalid said if the high tariffs are implemented after the 90-day pause, large importers may be able to absorb the extra costs, but smaller firms that lack liquidity risk financial ruin — potentially leaving goods stranded at ports.

What this means is that accepting high-tariff consignments could jeopardise smaller companies financially, leading to cargo pile-ups and costly detention charges as well as further burdening ports and maritime supply chains, he said.

There is deep concern as Port Klang and Port of Tanjung Pelepas, which are ranked among the world’s 20 busiest container ports and deeply engaged in moving cargo globally, could face a business downturn.

The escalating tension between economic superpowers the United States (US) and China arising from tit-for-tat tariffs has triggered negative ripple effects across the globe, severely affecting global maritime trade.

And Malaysia, being a highly trade-dependent nation, cannot escape the repercussions from the hike in US tariff rate to 24 per cent.

The shipping industry — already hit by COVID-19, volatile oil prices, and global tensions — is now grappling with rising shipping costs, port congestion, and a fragile supply chain.

The tariffs could also disrupt long-established manufacturing networks, with smaller manufacturers potentially losing critical overseas suppliers due to financial strain.

“Importers with deep pockets will pay the extra tariffs in addition to additional levies, but small companies without sizeable cash or liquidity will not pick up the goods and will leave them stranded at ports,” Nazery told Bernama in an interview recently.

“This will result in cargoes being taken back to the ports of origin by the exporters/suppliers, failing which they will just leave the goods at the ports of destination (and) this will cause the ports to slap costly detention charges to the importers, resulting in cargoes being stuck and eventually pile up at ports,” he said.  

Nazery emphasised that this would burden the ports and cause strains along the maritime supply chains, and the stuck cargoes will take quite a while to clear.

Once again, analysts said, the shipping industry finds itself in a situation that demands “all hands on deck.”

The tariff war is the most significant geopolitical development affecting the global economy, while the industry is still reeling from the heavy blow dealt by the COVID-19 pandemic, compounded by ongoing geopolitical tensions, volatile crude oil prices, and fluctuating freight rates.

Adding to the strain are rising shipping costs, port and berth congestion driven by surging cargo volumes, and the lingering fragility of the global supply chain  —  all of which came sharply into focus not long ago.

“Another repercussion from (US President Donald) Trump’s move is severe disruptions to the established order of the manufacturing supply chains which take a long time to build and nurture,” he said.  

Manufacturers face the looming threat of losing trusted suppliers from abroad as the former cannot withstand the financial crunch arising from having to pay much higher tariffs.  

“Although manufacturers tend to have multiple sources of suppliers in various locations, those without substitutes of suppliers who are as reliable and economically competitive as their established ones will stand to suffer the most,” Nazery added.

Trump’s Reshoring Drive: Boon for Malaysia?

Nazery said that US companies manufacturing abroad which are affected by the tariffs will not automatically embark on reshoring despite the rather protectionist measures undertaken by their government to safeguard their interests by imposing high tariffs on imports.

“The established order of the global supply chain and well-entrenched global manufacturing ecosystem dictate that companies seek places with the lowest cost of production; abundant and cheap labour; closest proximity to raw materials, components and target markets; good trade infrastructure; and favourable legal or institutional regimes.   

“They will likely seek countries with lower tariff regimes instead of quickly relocating to the US,” he added.

He said this could give countries like Malaysia an opportunity to lure US manufacturing companies to Malaysia’s shores with the various incentives and favourable conditions being offered.

Westports Holdings Bhd reported that tariff rates among key global trading nations escalated to unprecedented levels following decades of globalisation and the resulting inflationary pressures could curtail consumers’ purchasing power and consumption, elevating the risk of an economic slowdown or even a recession in major trading nations.

Lower containerised trade could emerge as a near-term impact. However, regional trade realignment and Asia’s economic dynamism could partially mitigate the downward pressure on container volume, the port operator said.

“The interim uncertainties and adjustments may pause containerised trade growth, but a new equilibrium, Asia’s economic dynamism and Malaysia’s commitment towards multilateral trade will reestablish a new baseline for sustained future long-term growth.

“⁠We are keeping our guidance which we provided at the beginning of the year, which is low single-digit growth. We think it is too premature to make a change now. If there is a need, we will do so later,” the company said.

Suria Capital Holdings Bhd managing director Datuk Ng Kiat Ming said the company’s subsidiary, Sabah Ports Sdn Bhd, continues to monitor the recent implementation of US tariffs and its potential impact on regional trade flows.

As of now, he said, Sapangar Bay Container Port (SBCP) has not experienced any negative effects from the tariffs and the port has actually recorded a positive performance in the first quarter of 2025, with throughput volume rising 11 per cent year-on-year for the January-to-March period.

“Notably, March 2025 saw a 23 per cent increase in volume compared to the same month last year, reflecting a healthy surge in regional shipping activity and a strong start to the year. This growth is largely driven by intra-Asia trade and the increasing presence of regional shipping lines calling at SBCP,” he said when contacted.

-- BERNAMA