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13 Jul 2020

Econ Digest

The U.S. opens an anti-dumping investigation into tires imported from Thailand Chinese tire manufacturers in Thailand are the most affected

       The COVID-19 pandemic has not only disrupted the production of auto tires in the U.S., but has also led the affected United Steelworkers union to file anti-dumping petitions against imported tires from Thailand, South Korea, Vietnam and Taiwan, due to a significant increase in the importation of auto tires from those countries (region). In addition, China, the party that has had an antidumping lawsuit filed against it by the U.S., has expanded its investments, mergers, and acquisitions in tire manufacturing in some of above countries as well. Thailand is accused of dumping of auto tires in the U.S. market, with the highest dumping margin of all four countries (region).

         If the investigation found that dumping exists, there is a chance that auto tires exported from Thailand to the U.S. will subject to higher anti-dumping duty than those from other countries. In particular, Chinese manufacturers in Thailand are likely to be the most affected, because they primarily focus on exporting to the U.S. More than two-thirds of them have no alternative production base for exporting to the U.S during the adjustment period in which charges are cleared, as Thailand is the only production base outside of China for them, while exportation from China to the U.S. is also hampered by an increased duty of 25%. However, Thai manufacturers will be affected to a lesser extent, because they also supply to the domestic market and have more diverse export markets, rather than being focusing solely on the U.S. market. In addition, certain Thai tire manufacturers have production bases in other countries such as India, so they can distribute their products to other markets in the short-term.

          It is KResearch's view that to avoid issues related to anti-dumping from various countries permanently, it is important to keep production costs of auto tires low and to improve the quality of products by increasing investment in research and development in order to build positive consumer perception. This will allow manufacturers to be able to expand their market with more diversified and reasonable pricing strategies, in line with the development of Chinese automobiles becoming well accepted by the global market nowadays. 

          KResearch estimates that the value of Thailand's tire exports in 2020 may decline to only USD4 billion as a result of the slowing global economy amid the COVID-19 pandemic. That figure represents a 21 percent contraction from the auto tire exportation value of USD5.07 billion reported for 2019. Meanwhile, amid slowing global economic conditions, it is expected that exportation within the spare tire market will continue to perform better than the OEM tire market, although such shipments have contracted like other tire types. Currently, the OEM tire market is being plagued by substantial declines in new car production around the world.

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Econ Digest