Context:

Thailand has become the largest overseas supplier of pet food to the United States, accounting for over a third of imported cat and dog food. However, President Trump's proposed 36 percent tariff on Thai goods threatens this industry, causing uncertainty and potential shifts in focus away from the U.S. market. Thai officials are negotiating to lower the tariff, potentially increasing imports of American agricultural products as a bargaining chip. The pet food industry in Thailand has grown rapidly, doubling its export value in five years, buoyed by a robust food processing sector and increased global demand. Companies like Bluefalo Petcare and Zuru have expanded operations in Thailand, leveraging competitive advantages over Chinese manufacturers due to lower tariffs and cost-effective supply chains.

Dive Deeper:

• Chatchai Lertviwatkul's company, S.I.P. Siam Inter Pacific, exports a third of its pet food products to the United States but faces challenges due to a proposed 36 percent tariff, which could disrupt the pet food export industry in Thailand.

• Thailand's pet food export industry has grown significantly, with its annual export value nearly doubling to $2.5 billion in the past five years, driven by a strong seafood and food processing sector that utilizes fish and meat byproducts.

• In response to potential tariff increases, Thai officials aim to negotiate with the Trump administration, possibly by increasing imports of American agricultural products, which could help lower material costs for the pet food industry.

• Companies such as Nestlé's Purina and Mars Petcare have invested heavily in Thailand, expanding manufacturing facilities to meet the increased demand for pet food during the pandemic and benefiting from the trade war between the U.S. and China.

• Zuru, a Hong Kong-based conglomerate, chose Thailand for its first pet food factory due to the country's favorable supply chain and tariff conditions, planning to consolidate manufacturing operations there and start production early next year.

• Bluefalo Petcare, founded by Tanut Totup, has rapidly expanded its operations in Thailand, opening new factories and capitalizing on the trade war. The company has gained a competitive edge over Chinese competitors by increasing its focus on exports to other countries.

• The volatility in U.S. trade policies has led some Southeast Asian businesses to consider shifting their market focus away from the United States, highlighting the broader impact of fluctuating tariffs on global supply chains.