The shockwaves from Donald Trump’s plans to increase tariffs on imports of vehicles extend far beyond Detroit.
This policy increases investment risks and threatens global supply chains that are connected to the automotive industry, which could have significant implications for developing economies such as Thailand.
Thailand: A vulnerable auto hub in crosshairs
South Korea, then Japan are the most vulnerable. Thailand, a manufacturing center in ASEAN is the most exposed. Nomura economists published a report on auto tariffs in Asia.
Thailand is preparing for the impact of Brexit.
Pichai Chunhavajira is the country’s finance minister. He acknowledged that auto parts exports would be affected by tariffs.
Pichai didn’t quantify Trump’s exact impact, but the implications of his impending tariffs are substantial.
Thailand has the most extensive car manufacturing hub in Southeast Asia. It boasts a vast network of factories, which supply raw materials and parts to global manufacturers, including tire makers as well as carmakers.
On Friday, the benchmark SET Index fell 1% to a new one-week low.
Index is down about 16 percent year-to-date as Trump’s Trade War injects uncertainty into a market that has already been battered with corporate scandals and weak economic growth.
Even though Thailand exports only 4.3% of autos to the US due to a weak demand globally, this could affect auto part shipments elsewhere.
Investors are moving away from volatile US markets and putting their money in Thailand.
Nomura analysts stated, “These effects will take time to manifest but in our opinion, they pose a medium-term clear threat to Thailand’s most important industries.”
On April 3, the 25% duty on imported vehicles will go into effect.
The 25% auto part tariff is scheduled to go into effect on May 3rd.
Trump’s Executive Order did not mention China by name, but said that the pandemic’s impact on global supply chain has weakened the US ability to maintain an industrial base at home.
The report also stated that the foreign automobile industries have “grown substantially” as a result of unfair industrial policies and subsidies.
Auto stocks in the United States and abroad have fallen precipitously since the announcement of tariffs.
The executive order has caused a sharp drop in shares of Toyota and Hyundai, two of the world’s largest automakers.
Volkswagen, BMW and other automakers in Europe have also seen their shares fall since Trump’s executive order.
The post Donald Trump’s Tariffs Threaten Global Auto Supply Chains: Beyond Car Stocks may be updated as new information becomes available.
