Bangkok: The automotive sector in Thailand is bracing for a significant downturn following the United States’ decision to impose a 25% tariff on imported cars and parts starting April 2. This development is expected to severely impact production levels and affect approximately 850,000 workers within the industry. Research agencies have projected that the tariffs, coupled with a decline in Chinese tourism, could depress Thailand’s GDP growth to below 2.8%. The Monetary Policy Committee (MPC) is considering additional interest rate cuts to mitigate the economic fallout.
According to Thai News Agency, Mr. Surapong Paisitpattanapong, an advisor to the chairman of the Automotive Industry Club and spokesman for the Federation of Thai Industries (FTI), expressed concern over the expected decline in Thai car and parts exports following the tariff announcement by US President Donald Trump. The new import taxes will encompass all cars, as well as critical components such as engines and transmissions, which could lead to reduced employment and economic instability. The Thai automotive sector is already grappling with diminished production and sales volumes, with some factories reducing operations and employee workweeks.
The US tariff increase is poised to affect not only exports to the United States but also those to major trading partners like Japan and Germany, who manufacture goods for the US market. In 2024, Thailand exported significant amounts of automotive products, including $320 million in cars and $1,566 million in auto parts to the US, making it the top export market. Other notable exports included $1,211 million in parts to Japan and lower amounts to Germany, England, Canada, and Vietnam.
The contraction in Thai automotive exports is compounded by shrinking domestic sales, driven by competition from Chinese electric vehicles, high household debt, and stringent loan approvals. The domestic market saw a significant decline in sales from over one million units in 2019 to 570,000 units in 2024. Exports in 2024 exceeded one million units, but they are expected to fall below this mark in the current year.
The broader economic picture reveals that the United States remains Thailand’s leading export market, accounting for approximately 18% of total export value. However, the potential for additional US tariffs poses a risk to Thailand’s economy, potentially impacting GDP by 0.6%. The Kasikorn Research Center has warned that the Thai economy’s growth target of 2.4% for 2025 may decrease, further exacerbated by the possibility of the US boosting domestic production.
Mr. Methas Ratanason, a Senior Economist at TISCO Economic Strategy and Analysis Center (TISCO ESU), noted that the ongoing trade tensions have led TISCO ESU to revise Thailand’s GDP forecast to 2.8% from an earlier estimate of 3.0%. The reduction reflects concerns over missed tourism targets and potential retaliatory tariffs by the US, which could impact key exports like machinery and electronic components.
Amid these challenges, the manufacturing sector faces continuous slowdown since 2014, with increased imports from China. The potential for foreign investment cancellations looms if Thailand is subjected to further US tariffs. The MPC has already reduced the policy interest rate to 2.00% but may implement further cuts if economic conditions worsen. The market remains vigilant for developments on the US trade policy front slated for April 2.