Thailand Faces Trade Hurdles as US Imposes New Tariffs

Thailand is confronting trade obstacles as the U.S. imposes a 25% tariff on steel and aluminum. This change jeopardizes Thailand’s export-dependent economy, particularly affecting its $41.5 billion trade surplus. In response, Thailand may pursue increased imports from the U.S. to alleviate tensions, though analysts warn of competitive pressures arising from redirected Chinese goods. Negotiations are vital amidst these turbulent trade dynamics.

Thailand is currently facing significant trade challenges due to newly imposed tariffs by the United States on steel and aluminum imports, under President Donald Trump’s administration. This move poses considerable risks for Thailand’s export-reliant economy, as the U.S. accounts for approximately 18% of its total exports, valued at around $55 billion in the previous year. The introduction of these tariffs threatens to disrupt existing trade dynamics, potentially impacting Thailand’s trade surplus which reached $41.5 billion last year.

The tariff wave began on February 4, 2025, when a 10% tariff was imposed on all goods from China, alongside a temporary pause on 25% tariffs on Canada and Mexico. Although Thailand has not yet been directly affected, economic experts share concerns that the country may be next, particularly as its exports of electronics, machinery, and agricultural products could face higher duties. Some economists predict that this could result in a GDP shrinkage of up to 0.5%.

To mitigate these risks, Thailand is proposing to boost imports from the U.S. This includes plans to purchase 1 million tonnes of ethane, aimed at narrowing the trade gap. However, should tariffs escalate, Thai manufacturers might encounter competitive challenges, especially as U.S. tariffs divert more Chinese goods to Southeast Asia, thereby undercutting local production. Conversely, this scenario may present an opportunity for Thailand to attract increased foreign investment from companies seeking to shift their production bases away from China.

Furthermore, the Trump administration is contemplating expanding tariffs to additional sectors, including automobiles and pharmaceuticals. The introduction of a proposed “reciprocal tax” may further heighten tensions, particularly for Thailand, which was the 10th largest aluminum exporter to the U.S. last year, valued at $270 million. The implications of these trade policies have already strained relationships with other nations including Canada and Mexico, and have heightened tensions with China, which has responded to U.S. tariffs with increased taxes on American products.

Currently, the geopolitical landscape indicates Thailand’s trade surplus makes it a target for possible tariff expansions. The utilization of import taxes as a foreign policy tool has not only ramifications for trade relations but also for broader geopolitical strategies. Historically, in his first term, President Trump escalated tariffs against China, while also altering trade agreements like NAFTA.

There are suggestions that Thailand could further open its markets to U.S. businesses, enhancing imports of key U.S. products such as crude oil, machinery, and agricultural goods. Experts advise that as trade tensions escalate, the U.S. Federal Reserve’s ability to cut interest rates may be hindered, contributing further strain to global markets. Thai agricultural exports may also be impacted by potential higher tariffs, prompting theories that increased purchasing of U.S. products could lessen tensions. Coordinated efforts may include negotiations for military cooperation and purchases of aircraft from U.S. manufacturers like Boeing.

Political dynamics may also influence these negotiations significantly. Some analysts speculate that Thailand might leverage politically sensitive issues, such as the repatriation of Uyghur detainees to China, to enhance its bargaining position in trade discussions. The possible influx of Chinese products into Thailand’s market, following loss of access to U.S. consumers, could further complicate matters.

In conclusion, Thailand is poised to face various economic challenges due to the recent tariff policies implemented by the United States. The impact on its export-driven economy could be significant, leading to diminished GDP growth and strained international relations. In response, Thailand may consider boosting imports from the U.S. and enhancing cooperation in various sectors. Negotiations will be crucial in mitigating the adverse effects of these tariffs, especially as geopolitical dynamics further complicate the situation.

Original Source: www.thailand-business-news.com