The announcement of a 19% reciprocal tariff by the US on Thai goods presents both challenges and opportunities for Thailand’s economy. While this rate aligns with regional averages, it also prompts several Southeast Asian nations, including Thailand, to make concessions—such as opening their markets more broadly to American products, often tariff-free.
Experts believe this development will bring substantial changes to Thailand’s trade landscape, raising questions about its impact on the local market and export competitiveness.
Potential Market Relocation and Export Losses
Nuttaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), warns that Thai exports like jewelry, rubber gloves, pet food, and home appliances could lose ground internationally due to heightened US tariffs. She notes that rubber gloves face increased competition from Malaysia, and Thai pet food faces rivalries from other countries, putting these markets at risk.
Additionally, the study suggests that imports of US products such as medical instruments, internal combustion engines, soybeans, pet food, food supplements, and machinery parts could increase, challenging local industries. However, Nuttaporn emphasizes that US goods tend to be high-tech and intermediate products, distinct from the cheap consumer goods from China that typically dominate Thai markets. She cautions that if Thai firms struggle to compete at home or abroad, investment could freeze, with the risk of production relocations to lower-cost countries if tariffs persist.
Opportunities for Reform and New Markets
Chanintr Chalisarapong, vice-chairman of the Thai Chamber of Commerce, sees the US tariff opening as a chance for economic reform. He highlights outdated regulations, especially in agriculture, that hinder Thailand’s competitiveness. Progress is underway towards a free trade agreement with the European Union, expected to be finalized by mid-2024, which could offset some US tariff impacts by expanding access to 27 European markets.
To mitigate the effects of increased tariffs, Thai exporters are urged to explore new markets—particularly in the Middle East, Eurasia, and Latin America, especially in sectors like pet food. However, the Federation of Thai Industries warns that unprepared sectors—such as agriculture and chemicals—may struggle without protective measures, as US imports could flood these markets, undermining local producers.
Impacts on Agriculture and SMEs
Agricultural sectors, especially livestock and crops, face potential difficulties, warned Kriengkrai Thiennukul, chairman of the FTI, citing the risk of influx from US cheaper imports. Thailand’s farmers could suffer, and the government may need substantial subsidies to keep the sector afloat, risking long-term economic and food security. The country may also consider import quotas and stricter border controls to safeguard domestic production.
Small and medium-sized enterprises (SMEs) are particularly vulnerable to the 19% US tariff, says analyst Sompop Manarungsan. Many SMEs, especially in processed foods, operate on thin margins—often single digits—and would find it hard to absorb such costs. To survive, they must seek new demand sources domestically and develop service sectors like tourism and healthcare to boost internal growth.
The US’s mass-scale agricultural production—e.g., corn, soybeans, and meat—poses an additional threat to Thai farmers, who often produce at higher costs. Sompop warns that without import restrictions, Thailand could face significant subsidies and food security risks, echoing Japan’s cautious approach to US agricultural imports.
Consumer Benefits and Cost Reductions
On the upside, reduced tariffs could lower prices of US imports, benefiting Thai consumers. Products like temperate fruits, nuts, pharmaceuticals, and dietary supplements might become more accessible and affordable. Importers could also see lower costs, which might translate into more competitive export prices.
Visit Limlurcha, president of the Thai Future Food Trade Association, expects that cheaper US animal feed ingredients and electronic components will aid local manufacturing, helping to lower production costs and offer consumers a wider product variety.
Sectors Likely to Be Affected
While some industries, like processed foods and chicken, are resilient due to strong domestic production, increased US imports might impact their markets by intensifying competition. For example, Thai poultry producers could benefit from lower feed costs but might also face challenges from US exports. Similarly, Thailand’s beef industry, dominated by Australian imports, may see increased US beef entries, offering consumers more choices but threatening local farmers, especially small-scale cattle producers.
Cheeta Ngohpraiwan, president of the Thaibrahman Breeders Association, suggests that importing US beef tariff-free could harm the local premium market, which may have to be protected through import limits and anti-smuggling efforts.
Thailand could also position itself as a regional leader in cattle breeding, leveraging status and branding—such as “Quality Thai Beef Cattle”—to gain a competitive advantage. Additionally, the halal market remains a promising growth sector, especially in Malaysia, Indonesia, and the Middle East, provided Thailand can meet international standards and improve traceability.