Thailand faces a severe trade challenge following the US announcement of 36 per cent tariffs on Thai goods. The Shinawatra government's dual strategy — appeasing Washington while courting Beijing — has backfired, alienating Western trade partners following the deportation of 40 Uyghurs to China. With its export-driven economy threatened and auto manufacturing in decline, Thailand must balance diplomatic relations and pursue structural reforms to survive mounting trade pressures.
Spring has delivered grim news for Thai trade. On 12 March, the White House imposed 25 per cent tariffs on aluminium, affecting Thai production. On 31 March, the US trade office published a short overview of Thailand’s trade barriers, highlighting problems with agricultural trade, investments and customs fees. Finally, on 2 April, US President Donald Trump announced long-awaited (but then delayed) ‘reciprocal tariffs’, apparently based only on 2024 trade balances.
At 36 per cent, the new tariffs on Thai goods were unexpectedly and devastatingly large — higher than for any other large economy in Asia except Vietnam. The United States is Thailand’s largest export destination, and prospects of US-oriented exports had powered surging Thai industrial investment. If implemented, these tariffs would lacerate large parts of Thailand’s economy. The Federation of Thai Industries estimated a half-point reduction in GDP growth, which appears vastly too optimistic given potential effects on future investments. Thai purchases from the United States may also suffer if Thailand’s and other Asian economies weaken.
The April announcement is not the first trade-related US warning to Thailand. In 2017, economist Brad Setser argued that Thailand fit the US Treasury’s currency manipulation criteria. In 2020, the Trump administration threatened sanctions over the baht’s low value. Since then, the baht’s value has fallen further, from an average of 31 per dollar in 2020 to around 34 by 2025. Still, in June 2024, a US trade delegation praised Thailand as ‘critical to economic security’ in a report to then-president Joe Biden.
During COVID-19, Thai exports thrived. Since 2019, the value of Thai exports to the United States nearly doubled, reaching 170 billion baht (US$5 billion) monthly in 2024. Thailand benefitted from US-China trade tensions, and new factories in Thailand supporting Dell, HP, Google and Apple products have helped US firms ‘de-risk’ technology supply chains. Nevertheless, some of Thailand’s rising exports look suspiciously like Thailand’s imports. Between 2019 and 2024, Thai data processor exports to the United States doubled, while Thailand’s electrical and electronic parts imports from China rose over 180 per cent. Some of Thailand’s soaring exports may be goods mostly produced in China.
Thailand’s government first responded to tariff threats with diplomacy. In February 2025, a Commerce Ministry delegation visited Washington to meet members of Congress and attend events like the National Prayer Breakfast. In late March, the government suggested halving Thailand’s bilateral trade surplus to US$20 billion. Thai diplomats also made overtures to hasten free trade negotiations with the European Union.
These efforts collided with another government strategy — appealing to China for economic support with expanded trade, investment and tourism promotion. China is Thailand’s second-largest export destination and largest source of tourists. While enthusiasm about China’s economy has declined in the West, most Thai officials remain confident that China will sustain annual GDP growth of around 5 per cent, making them more eager to engage Beijing.
To earn China’s support, Thai Prime Minister Paetongtarn Shinawatra visited China in November 2024, met President Xi Jinping in Beijing in February and promised to accelerate construction of a Chinese-organised railway to Laos and Yunnan. Weeks later, the government deported a group of 40 Uyghurs to Xinjiang. The European Union, Japan, Australia and the United States condemned the deportation, which could appear to insult US Secretary of State Marco Rubio, who had assured Congress he would defend the Uyghurs in Bangkok weeks earlier. The European Parliament then passed a resolution condemning Thailand’s deportations and escalating demands that Thailand change its lese-majeste laws before upgrading trade.
Thailand faces other trade problems. The former Prayut government offered subsidies to Chinese firms to produce electric vehicles in Thailand, assuming Chinese companies would share intellectual property and re-solidify Thailand’s role in Asian vehicle production. Most Thai auto parts manufacturers relied on supplying Japanese and Korean-owned factories for petrol-powered vehicles — factories which have adapted poorly to electric vehicles. While Thailand has gained little intellectual property, many Thai auto-related manufacturing jobs are now at risk. As Thailand’s trade deficit with China grows, more businesses have demanded protections against Chinese goods. As trade wars loom, Thailand has stumbled into difficulties with all its major trade partners — the United States, the European Union, Japan and China.
Thailand might hope to shield Thai manufacturers with a depreciating baht. This brings temporary comfort for traditional sectors — tourism, lower-skill manufacturing and agriculture — at the expense of consumers, investors and higher-value sectors exposed to brain drains. Thailand is currently trying to negotiate for lower tariffs with promises to import more US products like corn. Thai officials have highlighted Thai investments in the United States, but this would hardly sway tariffs based on bilateral balances.
Washington’s trade goals, which remain unclarified, might still align with certain Thai development needs. Washington demands ‘fairness’ for US businesses, while Thailand needs better training, higher-quality investment and more business competition. These could come with relaxing restrictions on foreign individuals, firms and products. Western expats sometimes complain that it is easier to launch a business in China than in US-allied Thailand and that Thailand’s customs enforcement is arbitrary and corrupted.
US food imports could help correct the low productivity, bloated labour force and disastrous environmental practices in Thai agriculture (due to land clearing, parts of rural Thailand periodically see worse air quality than Beijing). Trump wants ‘balanced’ trade. Although strict bilateral balances are unrealistic and undesirable, Thais could benefit from higher wages, improved social services, currency appreciation and more state scholarships for overseas education, all of which would moderate Thailand’s trade surpluses.
Ideally, Thailand would implement broad reforms not only targeted to the United States, with gradual transitions to ease adjustment pains of farmers and different sectors— delays Washington may be loath to accept. One can only hope that Thailand and the United States will reach a pro-reform deal benefiting both and averting a deeper trade crisis.
Source: East Asia Forum
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
