Kenanga Research has foreseen Malaysia’s domestic logistics sector to fare better as Malaysia is a beneficiary of booming e-commerce and trade diversion on US-China trade tensions.

The research house said in a note on Monday that the US is now Malaysia’s third largest export destination (after Singapore and China) as higher US tariff kicks in.

It believes that Malaysia will benefit from the trade diversion as the global trade reposition itself around the higher US tariff barriers.

According to Kenanga, China, the biggest export destination for Malaysia in 2019−2022 (Singapore took first place starting 2022), saw a double whammy (US tariff hike and ports closure due to the pandemic lockdown).

Overall, Malaysian ports’ container growth volume is expected to remain in low single-digit growth (based on Kenanga estimates of 4 percent growth for 2026 as Malaysian ports are heavily invested in the intra-Asia trade route which are less affected by the surges in tariff to the US) , partially benefitting from the potential trade diversion amid US-China trade tensions.

Kenanga also acknowledge that stricter regulations on carbon emissions which may pose new challenges to global trade which could impinge the trade growth, particularly, one from the United Nations’ International Maritime Organization (IMO) and another from the European Union (EU).

While the exact implications of the regulations of the IMO and EU’s Carbon Border Adjustment Mechanism (CBAM) on the seaport and logistics sectors remain unclear (especially for CBAM which is still pending finalization and to take effect by 2026), it noted the volume of containers heading to the EU will certainly be affected.

This is especially so for those originating from China, which is a major exporter of iron, steel and aluminium to the EU, it added.

It is noted that the ships must record a 2 percent annual improvement in their carbon intensity from 2023 through 2030 or face being removed from service.

Meanwhile, the EU’s CBAM policy could disrupt the exports of certain commodities (iron and steel, cement, aluminium, fertilizer, electricity, hydrogen) to the EU.

During the transition period between Oct 2023 and Dec 2025, EU importers must report embedded emissions in goods imported on a quarterly basis, as well as any carbon price paid to a third country.

When the CBAM takes full effect starting 2026, importers will need to buy carbon credits reflecting the emissions generated in producing them.

On the other hand, Kenanga noted the domestic logistics sector still fared better as Malaysia’s total trade grew 5.4 percent as of January to October 2025 versus full-year 2024 growth of 9.2 percent (trade surplus remained high at MYR 125 billion [$30.84 billion] in the same period versus 2024 level of MYR 139.1 billion [$34.32 billion]).

This is especially in the domestically driven third-party logistics (3PL) sector (thanks to the on-shoring business trend), which is less vulnerable to external headwinds, being buoyed by booming e-commerce.

It is noted that the industry experts projected the local e-commerce gross merchandise volume to grow at a compound annual growth rate (CAGR) of 5 percent from 2024 to 2027, reaching MYR 1.5 trillion ($370 billion) by 2027 from MYR 1.2 trillion ($300 billion) in 2024.

However, Kenanga also sees some local players to face intense competition from Chinese players which constrain their ability to fully leverage on Malaysia’s strong total trade growth.

This situation arises due to the irrational pricing set by Chinese logistics players despite the rising logistics operating costs (manpower & stricter weight limit regulation) and Chinese logistics players typically coming in as a package from the new entrant of China foreign direct investment (new plants).

“The booming e-commerce will spur demand for distribution hubs and warehouses to enable: (i) just-in-time (JIT) delivery, (ii) reshoring/nearshoring to bring manufacturers closer to end-customers, (iii) efficient automation system, including interconnectivity with the customer system, and (iv) warehouse decentralization to reduce transportation costs and de-risk the supply chain,” said the research house.

There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups, it added.

Malaysia’s Teleport appointed by Air Central China as exclusive India General Sales Agent