Bangkok: Academics believe the 19% tax deal will help factories avoid relocation, but will not impact supply chains.
According to Thai News Agency, the recent agreement reached by Thailand on a 19% tariff rate with the United States, comparable to that of ASEAN countries, is viewed by academics as a temporary relief rather than a comprehensive solution.
Associate Professor Dr. Sompop Manarangsan, President of Panyapiwat Institute of Management, commented that while the deal might offer short-term benefits by preventing the relocation of production bases, it does not address the challenges faced by supply chains. Each ASEAN country is subjected to a similar tariff, which temporarily averts trade diversion. However, the 19% tariff on Thai goods by the US increases costs for exporters, who must negotiate with importers wielding significant bargaining power due to high global tariffs. Exporters face reduced margins as they lower prices to boost sales volumes.
Dr. Sompop highlighted that the US’s average tariff rate of 15-20% could incentivize the relocation of production bases to the US, where products can be produced and exported globally at a 0% tariff rate. This strategic shift is expected as many foreign investors in Thailand, from countries like South Korea, Japan, and China, consider relocation. Consequently, Thailand’s trade competition will extend beyond ASEAN to include emerging manufacturers in the United States.
In conclusion, Dr. Sompop pointed out that the 19% tariff agreement, while preventing immediate trade diversion, introduces challenges such as high supply chain costs and increased competition from US-based industries. The current situation demands strategic planning, as the global trade landscape continues to evolve with significant investments in the US by countries like Japan, South Korea, and the EU.