KUALA LUMPUR (April 4): A slowdown in demand for goods due to US President Donald Trump’s sweeping tariffs is a key downside risk for Westports Malaysia Bhd (KL:WPRTS) in 2025, according to CGS International.

On April 2, 2025, Trump announced a 10% universal baseline tariff, with additional, higher tariffs for countries with large trade surpluses with the US, such as Malaysia.

The tariffs take effect as early as Saturday, April 5, 2025. 

China will see a total of 34% in new tariffs, in addition to the 20% tariffs already imposed since January 2025. This brought the average US tariff on Chinese goods to 76%. Vietnam will face a 46% tariff, Thailand 36%, and Malaysia 24%.

In a note on Friday, the firm said container volume going through Westports could be impacted in two ways due to the tariffs.

First, if the US’ demand for goods from China drops, Malaysia’s exports of intermediate goods to China could also decrease.

Second, if neighbouring countries face economic uncertainty, their consumption of Malaysian goods could reduce.

In 2024, 66% of Westports’ container volumes came from intra-Asia trade, with another 9% from Asia-US trade. 

CGS International said these trades could see weak growth in 2025 due to the potential impact of Trump’s actions, representing a key downside risk.

Its current forecast is for Westports to grow its container volumes by 3.7% year-on-year in 2025, from the record 10.98 million twenty-foot equivalent units (TEUs) of containers it handled in 2024.

CGS International said growth will come from a 2% growth in transhipment volume, and a 6% growth in gateway volume.

It’s not all negative, however, as CGS International believes there could be an upside for Westports, even in a higher-tariff environment, although it may not materialise immediately.

It said Malaysia’s position as one of the lowest-tariffed countries in Southeast Asia suggested that some factories may relocate to Malaysia, which could eventually generate additional gateway volumes for Westports. 

It qualified, however, that this is likely a multiyear process that takes time to materialise. 

“We still believe that Westports is a good stock to be invested in because we think that a Port Klang container tariff hike is likely to be implemented in the second half of 2025,” the firm said. The number of analysts that concur, outnumber those who don’t, with 11 “buy” calls and eight “hold” calls on the stock, according to Bloomberg data.

CGS International has pencilled in a 15% container tariff hike from Sept 1, 2025, and another 15% from Sept 1,2028, a 30% hike in total. 

It noted that while there is a small risk of delays in container tariff hikes due to appeals from Malaysian manufacturers, Westports’ expansion project is vital to the national economy. As a result, the government is expected to show support for Westports’ funding requirements. 

The port operator reported a net profit of RM898 million, on a RM2.3 billion revenue for the financial year ended Dec 31, 2024.

Westports’ share price was up 1% to RM4.76 a share earlier on Friday, giving it a market capitalisation of RM16.2 billion. The stock is up 2.15% this year.