The US's announcement of a 25% tariff on automobiles has triggered fresh concerns over the sluggish Thai automotive industry as analysts worry about the short-term impact and long-term export uncertainties.
The new tariff, announced yesterday by US President Donald Trump, is scheduled to take effect on April 2, while auto parts shippers can expect to face new duties no later than May 3, according to media reports.
"We are really concerned about Trump's policy and will monitor the impact," said Surapong Paisitpatanapong, vice-chairman of the Federation of Thai Industries and spokesman for the federation's Automotive Industry Club.
The announcement came as car exports slowed during the first two months this year, with the volume plunging by 18.1% year-on-year to 143,644 units, according to the club.
Last month, car exports fell by 8.34% to 81,323 units.
Mr Surapong attributed the decrease to many factors, including Washington's trade policy, which caused Thailand's trading partners to reduce purchases of mostly internal combustion engine-powered cars as they wait for a clearer tariff policy from Trump.
Thai auto parts manufacturers are expected to face similar tariff updates in May, he said.
Local parts makers are already coping with a technological disruption as electric mobility gains in popularity.
Potential buyers are facing difficulties accessing auto loans amid high household debt levels, causing a dip in domestic car sales that affects both auto parts and vehicle manufacturers.
Suwat Wattanapornprom, head of research at Krungsri Securities (KSS), said the Trump tariff hike on imported cars from 2.5% to 25% is expected to have a negative psychological impact on Thai automotive firms in the short term.
Roughly 4-5% of Thailand's auto exports and 10% of auto parts go to the US.
The value of automotive exports to the US is about US$1 billion, making Thailand the ninth-largest exporter to the US, representing 5% of total US imports.
Around half of US auto demand is served by imports, with the balance domestic production, according to KSS.
"Electronic parts for automobiles could be affected. KCE Electronics, for example, primarily exports to Europe, but also ships about 20% of its printed circuit boards to the US," said Mr Suwat.
KSS recommends an underweight stance on the sector. However, Trump said there would be room for negotiations on reciprocal taxes.
Amonthep Chawla, chief economist at CIMB Thai Bank, said the US still needs imports of up to 50% to serve its auto demand.
"If the same tariff rate is applied to automobiles imported from every country, Thailand's exports to the US will remain competitive. But if different rates are applied to other countries, or Thailand faces tariffs, but manufacturers from other countries are exempt, that would be a big concern," said Mr Amonthep.
Other sectors exposed to risks from US tariffs include electronic parts, processed food, chemicals and agricultural products, he said.
Maybank Securities said among regional economies, Thailand exports the most automobiles to the US in absolute terms.
Even though the US market accounts for only 7% of its auto exports, excess supply from other exporters displaced by blanket US duties on vehicles will still be a major supply shock in Thailand, Maybank said in a research note.
