Trump's auto tariffs are likely to hit an emerging Asian auto hub, showing there are risks for investors everywhere
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- Trump's 25% tariffs on auto imports stand to impact global carmakers and supply chains.
- Thailand's auto exports are expected to be hit, adding to investor gloom and risk.
- China's offshore manufacturing facilities could also be impacted.
US President Donald Trump's auto import tariffs are impacting more than carmakers' stocks — global supply chains connected to the vast vehicle industry are also getting hit, adding to investment risk.
"South Korea is most exposed, followed by Japan. Within ASEAN,
Thailand — a regional manufacturing hub — is most vulnerable," Nomura economists wrote in a note on March 27 about the auto tariff risks in Asia.
In Thailand, Finance Minister Pichai Chunhavajira told reporters on Thursday that the country's auto part exports will be affected by the tariffs.
Pichai did not quantify the impact of Trump's impending levies on Thailand. The country is Southeast Asia's largest car production hub, with an extensive network of factories that supply parts and raw materials for global players from carmakers to tiremakers.
Thailand's benchmark SET Index dropped 1% on Friday to a one-week low. The index is about 16% lower year to date as Trump's trade war injects more uncertainties into a market already battered by corporate scandals, weak economic growth, poor corporate earnings, and political instability.
Thailand's auto shipments account for just 4.3% of its exports to the US, but weak global demand could depress shipments of auto parts elsewhere.
"These effects may take some time to materialize but, in our view, pose a clear medium-term threat to one of Thailand's leading industries," wrote Nomura analysts.
The vulnerabilities in Thailand underscore the existence of investor landmines worldwide as investors move some investments away from the US's volatile markets.
The 25% tariff on all imported finished vehicles is slated to take effect on April 3. A 25% tariff on auto parts is slated to take effect no later than May 3.
Trump's executive order did not name China, but it said the pandemic and its impact on global supply chains has undermined the US's ability to maintain a resilient domestic industrial base. In contrast, foreign auto industries "propelled by unfair subsidies and aggressive industrial policies, have grown substantially," the order stated.
The tariff announcement sent domestic and foreign auto stocks tumbling.
In Asia, Japan's and South Korea's car makers are expected to be in the direct line of fire, with shares of auto giants Toyota and Hyundai posting sharp losses since the executive order was signed.
In Europe, shares of automakers also fell, with Germany's Volkswagen and BMW down 4% since Trump signed the executive order.