Impact of US Tariff Policies on Thai Auto Parts Industry
Thai auto parts manufacturers are bracing themselves for the effects of U.S. tariff policies, which have introduced new challenges to their operations. These challenges are compounded by concerns over fluctuating global steel prices, which could further impact the automotive sector.
Recent discussions held by the Federation of Thai Industries’ (FTI) Auto Parts Industry Club highlighted the significant pressure being faced by local manufacturers. The club’s chairman, Suphot Sukphisarn, emphasized that the industry is closely monitoring developments regarding reciprocal and auto parts tariffs.
The situation escalated when U.S. President Donald Trump imposed a 25% tariff on foreign-made automobiles on April 2. This was followed by an additional 25% import tax on engines, transmissions, and other essential vehicle components on May 3. These measures have had a direct impact on Thai auto parts manufacturers, who export their products to various countries, including the United States.
Thailand’s exports of motor vehicles, accessories, and auto parts to the U.S. reached $1.89 billion last year, according to data from Thai Customs and the Commerce Ministry. In the first five months of this year alone, the value of these exports reached $766 million. This highlights the significance of the U.S. market for Thai auto parts makers.
Moreover, even if Thai auto parts are sold to other countries that then assemble and export cars to the U.S., the 25% tariff on foreign-made automobiles still has an indirect impact on the industry. This interconnectedness means that any disruption in one part of the supply chain can affect multiple stakeholders.
On July 7, Trump sent a letter to Thailand indicating that the U.S. would impose a 36% reciprocal tariff on Thai imports starting August 1. Although this rate does not include any sector-specific tariffs that may be applied separately to goods from key industries, it still poses a potential threat to the automotive sector.
Mr. Suphot warned that if the tariff slows down Thai exports, it could negatively impact the country’s GDP and harm the economy, with the automotive industry bearing the brunt of the consequences. He noted that up to 90% of auto parts in the domestic market are used for pickup assembly, a sector already struggling with sluggish sales.
In addition to the tariff issues, there are growing concerns about the steel industry. Japan’s Nippon Steel finalized its $14.9 billion acquisition of U.S. Steel in June after 18 months of negotiations. Industry experts are worried that this takeover could influence global steel prices.
If steel prices rise, car assembly could slow down, which in turn could affect auto parts manufacturing. This potential ripple effect underscores the complex interdependencies within the global automotive supply chain.
The combination of these factors presents a challenging landscape for Thai auto parts manufacturers. As they navigate these uncertainties, the industry must remain adaptable and proactive in seeking solutions to mitigate the impacts of external economic pressures.
