Call for strategy to cover circumvention
Aat Pisanwanich, an expert in international economics and an advisor on Asean affairs at Intelligence Research Consultant, said the US government's decision to impose tariffs of 20% on Vietnamese goods and 19% on Thai goods is expected to heighten competition between the two nations in the US market as they both offer a variety of similar products.
According to Mr Aat, most Vietnamese products have a higher market share in the US than Thai products. On average, Vietnamese goods hold a 72% market share compared with a 28% share for Thai products.
Key Vietnamese exports to the US include computers and peripherals, smartphones and peripherals, chips, office chairs, and furniture, representing 36% of Vietnam's total shipments to the US.
Meanwhile, Thailand's main exports to the US are smartphones, computers, tyres, chips and electrical transformers, which make up 39% of its total exports to America.
Peter Navarro, senior counsellor for trade and manufacturing to US President Donald Trump, said roughly 30% of Vietnam's exports to the US are classified as resulting from circumvention, whereas Hanoi-based Techcombank claimed the figure is 17%.
Last year, China's exports of machinery and electrical appliances to Vietnam surged by 48% year-on-year to US$77 billion, accounting for 17% of China's total exports to Vietnam.
During the same period, Vietnam's exports of machinery and electrical appliances to the US rose by 41% year-on-year to $45 billion.
Mr Aat said while Vietnam's exports to the US climbed, the country also increased its imports from China.
"Some Thai goods display a similar trend, and Thailand may face a 40% tariff for transshipment from the US, similar to what Vietnam is experiencing," he said.
Mr Aat said his analysis is based on 24 key export products from Thailand and Vietnam shipped to the US.
Last year, these products accounted for 53% of Thailand's total exports to the US and 65% of Vietnam's shipments.
"Vietnam's labour costs are 18-25% lower than those in Thailand and fuel and electricity are 10-15% cheaper. Therefore, Vietnamese goods are 5-10% cheaper than Thai products, which may lead to a trade diversion effect between the two countries' products," he said.
The analysis found the US tariffs are expected to reduce Vietnam's exports by $18.9 billion and Thailand's exports by $8.16 billion.
When factoring in the trade diversion effect, Thai exports could drop by 457 billion baht this year, said Mr Aat.
He called on the government to swiftly develop a national strategy to address circumvention practices and the improper use of rules of origin, particularly for goods containing local content at a rate of less than 40%.
This initiative should include collaboration with the US Trade Representative to create "digital traceability", a verification system for such goods.
Mr Aat also urged the authorities to create a new industrial production chain, enabling expansion and connection with other markets while securing Thailand's share in the US.
He said a significant overhaul of the production sector is essential, enhancing the value of agricultural and industrial products to align with global market trends.
A new investment framework should be introduced, requiring foreign investors to increase their procurement of materials from Thai small and medium-sized enterprises and farmers, said Mr Aat.
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