Breaking down the details of US tariffs

Following the US implementation on Aug 7 of a 19% reciprocal tariff on imported Thai goods, some questions remain. The Department of Trade Negotiations (DTN) and the Department of Foreign Trade (DFT) have clarified some concerns.

What tariff rates apply to Thai exports to the US?

Thai exports to the US face a tariff rate that consists of the most favoured nation (MFN) rate plus an additional reciprocal tariff of 19%, according to both departments.

MFN tariffs are what countries promise to impose on imports from other members of the World Trade Organization (WTO), unless the country is part of a preferential trade agreement such as a free trade area or customs union.

However, the DTN said some items face different tariff rates.

Products subject to tariffs under Section 232 of the US Trade Expansion Act are exempt from this reciprocal tariff. This category includes automobiles, which have been subject to an MFN rate plus a 25% tariff since April 3, 2025, while auto parts have faced the same rates since May 3.

Steel and aluminium products have been subject to an MFN rate plus a 50% tariff since June 4, while copper products faced the same rate since Aug 1.

For products outside these specific categories, the US imposes a reciprocal tariff of 19% on top of the MFN rate, in addition to any existing duties such as anti-dumping (AD), countervailing, anti-circumvention and safeguard measures.

For example, if a Thai company exports paper plates (HS Code 4823.69.0040) to the US, the MFN tariff on these would be 35%. If the company also faces a 70% AD duty, the total tariff would amount to 124% when the 19% reciprocal tariff is added.

However, the 19% tariff does not apply to goods that arrived in the US before midnight on Aug 6 (Eastern Standard Time), as long as they are removed from warehouses by midnight on Oct 4. These items are charged only the original baseline tariff of 10%.

What factors enabled Thailand to receive a 19% tariff rate?

The Thai trade negotiation team was in continuous discussions with the US, both at the technical and policy levels, to reduce the tariff rate from 36% to 19%, aligning with other countries in the region.

The negotiation framework aimed to rebalance trade and covers several important issues including enhancing market access for US goods, reducing non-tariff barriers to facilitate trade, establishing rules of origin to benefit Thai and US goods, supporting the digital economy, increasing Thai imports of US goods, and collaborating to strengthen economic security.

The DTN said these topics formed the foundation for discussions regarding the adjustment of the reciprocal tariff rate.

Can the 19% tariff rate change? If so, how?

Yes, the tariff rate can be changed. The primary authority to make such a decision lies with the US president.

If the US determines current tariffs are inadequate in addressing the US trade deficit, or if trading partners fail to implement the agreed commitments, the reciprocal tariffs may be increased.

Stakeholders are advised to monitor the situation as US trade policy is uncertain and unpredictable.

What is the transshipment tariff? Which goods are covered or at risk of being subjected to this tariff?

The transshipment tariff is a tax applied to goods that are exported from another country, transit through Thailand, and then are sent to the US. They do not originate in Thailand based on US rules of origin.

For example, these are goods brought into Thailand from abroad and then exported to the US without further production in Thailand.

The transshipment tariff applies to all goods.

Goods at risk of incurring this tariff can be identified through the DFT’s watch list, which currently consists of 65 items including tyres, steel oil pipes and artificial stones.

How can transshipment be prevented?

The issue of transshipment poses significant challenges to the integrity of export products, diminishes economic value, and raises concerns about consumer safety.

To combat this problem, it is crucial to implement stringent monitoring at the source, enforce laws rigorously, and maintain oversight by relevant agencies, noted the DFT.

Authorities must also keep a close eye on circumvention cases, where goods from third countries misrepresent their Thai origin. This requires a comprehensive approach that includes regular factory inspections, verification of production costs, and issuance of certificates of origin by the DFT.

These efforts ensure Thai exports comply with rules of origin requirements.

How was the negotiating process for the tariff terms?

The Thai negotiating team, led by Finance Minister Pichai Chunhavajira, engaged in ongoing talks with the US. A draft of the joint statement on a Reciprocal Trade Agreement Framework was finalised and serves as a foundation for further discussions.

The Thai cabinet already approved the joint statement.

Detailed negotiations are expected to commence in late August and be finalised by the end of this year. After the agreement is finalised, legal procedures must take place before implementation.

Are there any additional considerations regarding the tariff?

The DTN said while several countries including Thailand should benefit from reduced US tariff rates, products must comply with rules of origin requirements to be eligible.

Goods must originate from the country claiming the benefit when exported to the US, with a focus on utilising local raw materials. Regional value content accumulation may be allowed under agreed-upon conditions.

The US is still reviewing this issue, and once discussions are complete the DFT plans to communicate clarifications to the private sector.

Source – Bangkok News