Kiatnakin Phatra Securities (KKPS) noted in an analysis that Thailand is confronting escalating risks to its export sector as new U.S. trade barriers go far beyond headline tariff rates, raising the specter of a deeper overhaul in global supply chains and foreign investment flows.
While the upcoming U.S. reciprocal tariff on Thai goods stands officially at 19%, the far more severe threat comes from a potential 40% penalty on exports deemed to contain excessive Chinese content—a risk that could sharply erode the country’s competitiveness in its manufacturing core.
At the heart of the issue is the definition of “origin” under the Regional Value Content (RVC) criterion, a threshold that will determine whether Thai goods qualify as authentically local or fall under the U.S. classification of “transshipped” Chinese products.
If U.S. authorities insist on a higher RVC—potentially demanding 50-60% local content—major Thai export sectors such as electronics, automotive, and machinery could lose their preferential status, exposing them to the punitive tariff.
Much of Thailand’s recent growth as a manufacturing hub has relied on navigating around the U.S.-China tensions, drawing foreign direct investment from China and Singapore keen to leverage Thailand’s tariff advantages, said analysts at KKPS. Stricter origin rules would upend this model and could accelerate shifts in FDI, with Japanese and Western firms possibly stepping in, but with no guarantee of matching previous investment volumes.
Recent trade data points to Thailand’s vulnerability. The country’s trade surplus with the U.S. has widened, while its deficit with China has deepened—a sign that a growing share of its exports to the U.S. are, in effect, “made in China” in terms of their input composition.
The risk is not evenly spread across all sectors. Electronics, machinery, and auto parts rely heavily on imported components, often flirting with the 40-60% local value-added line. If U.S. authorities impose stricter checks, these sectors could be disproportionately exposed. Conversely, sectors such as food, agriculture, and chemicals, which generally have higher domestic content, are less likely to face tariff escalation.
Beyond export competitiveness, Thailand faces the additional challenge of import pressures: the threat that export restrictions will coincide with a surge of cheaper Chinese goods arriving in the domestic market.
As scrutiny over origin rules intensifies, Thai policymakers find themselves at a crossroads. To preserve its position in global supply chains, the government will need to bolster the domestic content of key industries, weave local suppliers more deeply into value chains, and negotiate aggressively for exemptions or phased adjustments with U.S. trade officials.
