Thai Industries on Edge as US Demands 60% 'Local Content' for Exports
A crucial meeting is set for this week to negotiate rules of origin, with experts warning a high threshold could hit key sectors hard
- The United States is demanding that Thai exports contain a minimum of 60% local content to qualify for a standard 19% tariff.
- Products failing to meet the new local content rules could be hit with a significantly higher tariff of 40%, a measure intended to prevent transshipment from other countries.
- Thai officials are negotiating for a lower 40% threshold, as industry leaders warn that the U.S. demand is a "severe blow" that many sectors will not survive.
A key meeting between "Team Thailand" and the United States is scheduled for this week to iron out the details of new rules of origin, a crucial issue following the US's decision to slap a 19% tariff on Thai goods.
While the 19% rate is more favourable than many had feared, a new, more serious concern has emerged: a potential 40% tariff on goods that fail to meet strict new local content requirements.
This measure, aimed at preventing other nations from transshipping their products through Thailand to avoid higher tariffs, is a major sticking point in ongoing negotiations.
The US is pushing for a minimum of 60% of a product’s value to originate from within Thailand to qualify for the standard 19% tariff.
A source from the Thai government revealed that Team Thailand will argue for a 40% local content threshold.
However, the US is holding firm on 50-60%. The Ministry of Commerce expects clarity on the final figure by the end of August 2025.
Pichai Chunhavajira, the Deputy Prime Minister and Finance Minister, confirmed that no final decisions have been made on which product categories will be affected.
Speaking at a recent seminar, Poj Aramwattananont, chairman of the Thai Chamber of Commerce, warned that a 50% local content requirement would be a severe blow.
"If Thailand is hit with a 50% local content requirement, many of our industrial sectors will not survive," he stated, adding that the US is expected to apply the same rate to all countries.
He argued that the government should support industries that are hit hardest and look to capitalise on any opportunities for agricultural exports, such as corn.
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), expressed concern about a separate 40% transshipment tax.
He highlighted that if Thailand is subject to the same tax as Vietnam—where goods from other nations are taxed at 40% when shipped through the country to the US—it could be a serious problem.
Kriengkrai noted that while Thai exports have grown by 15% in the first half of the year, with a significant 27% increase to the US, this does not tell the full story.
He pointed out that Thailand’s Industrial Production Index has grown by less than 1%, suggesting that a large volume of exports are simply goods being transshipped.
He also warned that a second round of tariffs could include an additional 40% transshipment tax on top of existing anti-dumping and anti-subsidy tariffs (AD/CVD/AC) for products with forged origins.
Payong Srivanich, chairman of the Thai Bankers' Association, stressed that the new rules will be critical for Thailand's competitiveness.
"The definition of local content must be clear and accurate," he said, "to ensure Thai businesses can not only survive but thrive."
