Morgan Stanley’s report wrote that the U.S. imposition of tariffs diminished the significance of efforts by original equipment manufacturers (OEMs) to diversify procurement and production bases.

This is because additional tariffs are now being levied on exports from countries like Vietnam, where many OEMs have massive production capacity. This is expected to place operational pressure on OEMs, as they are unable to shift orders in the short term to avert the tariff impact.

Related NewsCiti Prefers TECHTRONIC IND, SHENZHOU INTL; Trump's Tariffs Hit Apparel & Footwear Biz Harder
The broker anticipated that while various countries may begin actively engaging with the U.S. government to seek solutions for the additional tariffs, a quantitative analysis of the financial impact on OEMs under different scenarios remains necessary.

The report found that the impact on suppliers is more manageable only when average additional tariffs are constrained to below 20% and OEMs do not bear more than 25% of the tariff burden.

Compared to peers, OEMs with higher profit margins or lower exposure to the U.S. market are less affected, while those with lower profit margins and higher U.S. market exposure will inevitably face greater adverse impacts from the tariffs.

Additionally, for apparel OEMs, Morgan Stanley was upbeat about SHENZHOU INTL (02313.HK)  +0.450 (+0.789%)    Short selling $40.06M; Ratio 14.318%   given its high profit margins and relatively lower revenue exposure to the U.S. market versus other OEMs, followed by CRYSTAL INTL (02232.HK)  +0.020 (+0.367%)    Short selling $4.22M; Ratio 11.499%   . For footwear OEMs, the broker favored STELLA HOLDINGS (01836.HK)  +0.140 (+0.971%)    Short selling $4.16M; Ratio 9.969%   and YUE YUEN IND (00551.HK)  +0.380 (+3.270%)    Short selling $22.83M; Ratio 23.705%   in pecking order.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-07-11 16:25.)