Call for deeper integration in Asean as tariffs menace
"Businesses must be prepared for exports to the US to cost more in that market. We cannot bet on the possibility that tariffs will go away. Given its rising fiscal deficit, tariffs will increasingly be an important source of tax revenue for the US government," said Mr Gan.
"Therefore, exports to the US will result in more costly products for some time to come."
He said businesses must also be prepared for greater scrutiny over their production and supply chains, potentially setting up separate lines for exports to the US.
The US will likely extend preferential tariffs on imports of steel, vehicles and pharmaceuticals, said Mr Gan.
Companies selling materials or components that are used by businesses in other countries that export to the US should expect similar requirements to be placed on them, he said.
"In addition to differentiating their product and supply chains, companies must diversify into new markets, even new products and services," said Mr Gan.
"There is a concerted effort among like-minded partners to preserve an open global trade environment, but we must be prepared for a more protectionist landscape ahead of us."
In order to build a more resilient Asean Economic Community, he said Asean has moved to deepen economic integration within the region.
The group recently concluded negotiations on upgrading the Asean Trade in Goods Agreement by enhancing collective commitments on non-tariff measures, as well as improving trade facilitation and transparency on areas such as customs proceedings.
Negotiations on the Asean digital economy framework agreement have begun, targeting a conclusion by year-end, aligning digital rules and standards as well as promoting interoperability of digital systems such as digital identities and payment systems, Mr Gan told a regional conference co-hosted by United Overseas Bank (UOB).
Asean also wants to broaden collaboration with partners and other trading groups, such as the Gulf Cooperation Council (GCC), including the possibility of establishing a free trade agreement between Asean and the GCC, he said.
"We are also working on a dialogue between Asean and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [CPTPP], which we hope will pave the way for Asean and the CPTPP to collaborate on areas of mutual interest, such as the digital economy, trade facilitation and supply chains," said Mr Gan.
Together with dialogue partners such as Australia, New Zealand, China and Japan, Asean is exploring how to enhance and expand the Regional Comprehensive Economic Partnership, he said.
Asean is committed to strengthening the rules-based organisational trading system, with the World Trade Organization (WTO) at its core.
"WTO remains an important institution and a foundation to build a better global rules-based trade architecture," said Mr Gan.
"While the system is not perfect, Asean is committed to working together to strengthen the WTO and the global trading system."
Wee Ee Cheong, deputy chairman and chief executive of UOB Group, said Asean member countries have committed to enhancing intra-Asean trade flows from the current level of less than 30%.
"Trade remains a critical economic driver for Asean," he said.
"Small businesses are the backbone of the Asean economy. Every global shift requires these small firms to adapt their business models to better compete."
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Other companies with high margins should not be significantly affected by the tariffs, said Mr Kriengkrai. Though changes in US policy are expected to disrupt trade, Thai entrepreneurs should take this as an opportunity to lift their competitiveness, he said. One concern is the influx of products redirected to Asian markets due to US tariffs, hampering manufacturers in the region, said an executive in the electrical appliance sector who requested anonymity. Thai manufacturers are advised to adopt more technologies to enhance production processes and reduce costs, said Mr Kriengkrai. "We also need to seek alternative markets other than the US by forging new partnerships," he said. The FTI asked the government to help businesses access financial sources at a time when they face costlier exports. Thai farmers also need help if the government is allowing more imports of US crops in exchange for the 19% tariff rate, said Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry. BURDEN FOR SMES Supree Thongpetch, chairman of the Thai Small and Medium Enterprise Council, which represents 80 member associations, said more than 2 million Thai SMEs that export to the US will face challenges based on the new tariff. He said many of these small businesses rely on online platforms such as eBay and Amazon to sell their products, often avoiding import duties since they typically export in smaller quantities. Their products range from maternity and baby clothing to aroma and spa items. The US currently applies low tariffs or exemptions for certain goods with existing purchase orders. However, the increase to a 19% tariff could put these businesses at a disadvantage as they may struggle with rising costs and lose their competitiveness, said Mr Supree.
