Thailand’s auto tire exports worrying…constrained by U.S. trade barriers

        In recent years, it has become clear that the US has increasingly taken a variety of measures to protect its trade interests with its international trading partners. On 16th December 2020, the US Department of Treasury labeled Vietnam as a currency manipulator to benefit its exports in the report of Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, right after the U.S. government announced in early November the imposition of countervailing duties (CVD) on Vietnam’s auto tires at rates ranging from 6.23% to 10.08%. Thailand is no exception, having had to face various U.S. trade protection measures(1) in the past, including being added to a “Monitoring List” for suspected currency manipulation, having its GSP preferential tariff treatment suspended in November 2020, and being investigated for auto tire dumping (the result is expected to be known on December 29, 2020). Going forward, KResearch views that the US will continue to implement such trade protection policies, especially after the COVID-19 pandemic, to accelerate the country’s economic recovery.

         Regarding Thailand’s products exported to the U.S. that are likely to be the target of investigation under the US trade protection measures, KResearch sees that auto tires will be one of the products of great concern to the U.S., because Thailand’s auto tire exports to the U.S. account for more than 22% of U.S. auto tire imports from around the world. Moreover, after foreign companies, especially from China, are increasing their investment in Thailand’s tire manufacturing industry to export auto tires to the U.S., the U.S. tends to have to import more auto tires from Thailand in the future. This will not have much of a direct impact on domestic and non-domestic tire manufacturers in the U.S. that have factories across the world and that are chasing profits in the global market; however, supply chain producers of U.S. tire raw materials such as steel fibers will be affected by the decline in domestic tire production, leading to the U.S. trade protection measures to protect the domestic industry. KResearch views that this will have a considerable impact on Thailand’s export revenue, as the value of auto tire exports ranks second in Thailand’s exports to the U.S.

          KResearch believes that, if Thai auto tires are subject to the US trade protection regulations in future, Thai auto tire exports to the US could reverse to shrink from the growth they have been experiencing since 2015. KResearch predicts that the value of Thai auto tire exports to the U.S. will be US$3.042 billion in 2020, an increase of 1.9% from US$2.985 billion in 2019. The issue of the U.S. trade protection measures is a top priority for Thailand to keep an eye on, and if penalties are imposed in the near term due to AD measures, it will immediately affect Thai auto tire exports to the U.S. in 2021.

(1) Thai products that have been hit recently by the domestic industry protection measures by the U.S. include solar panels and washing machines due to the additional import protection measures, steel and aluminum due to the National Security measures, frozen/processed shrimp, handheld plastic bags, various steel products and citric acid due to AD/CVD measures.