The global financial markets experienced significant shifts last week as stock markets fluctuated, gold prices surged, and oil prices declined. These movements were largely driven by renewed trade tensions between the United States and China, with Thailand’s stock market feeling the ripple effects as it plunged in response.
US-China Tariff Battle and Thai Implications
While the US delayed tariff hikes on Canada and Mexico, President Donald Trump imposed a 10% tariff increase on Chinese goods, prompting immediate retaliation from Beijing. This escalation has raised concerns among Thai economists and business leaders, as Thailand’s economy is heavily reliant on trade with both the US and China.
Rak Vorrakitpokatorn, president of the Export-Import Bank of Thailand, warned that with China facing US tariffs and the EU potentially becoming the next target, Thailand must closely monitor potential anti-dumping and countervailing duty measures. These measures have already affected Thai industries, such as solar panels, as China has relocated production to Thailand to bypass US tariffs.
“China’s lower production costs and logistical advantages enable it to absorb tariff impacts better than other countries, making it unlikely that Thai products will fully replace Chinese goods in the US market,” Mr. Rak explained. However, if US tariffs on Chinese imports continue to rise, Thai exporters may find greater opportunities to expand their market share.
Thailand’s Trade Position and Strategic Adjustments
Thailand currently runs a trade surplus of $40.7 billion with the US, making it a potential target for future tariff increases. To mitigate risks, Mr. Rak advised Thai businesses to diversify their markets and reduce reliance on the US and China.
India, which maintains a neutral stance in the trade conflict and boasts strong economic growth, is highlighted as a key alternative market. The Indian halal market, catering to a global Muslim population of around 2 billion people, also presents significant potential for Thai exporters.
Financial volatility stemming from global trade uncertainty poses additional challenges, with exchange rate fluctuations impacting exporters. Mr. Rak emphasized the importance of risk management tools like forward contracts to hedge against currency risks. He also urged businesses to adopt proactive scenario planning to assess risks and develop response strategies.
Potential Trade Negotiations and Risks for Thailand
Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group, cautioned that Thailand could face increased scrutiny from US trade policies, as Washington may use tariffs as a negotiation tool. The US has historically targeted countries with large trade surpluses, making Southeast Asia a likely focal point for future trade measures.
Beyond direct tariff concerns, Thailand may also encounter pressure to grant greater market access to US agricultural products. On the other hand, potential relocation of multinational production facilities from China to Thailand could provide new opportunities for investment and job creation.
“Given Trump’s negotiation style, the US is likely to focus first on Europe, then China and major Asian economies, before turning its attention to Southeast Asia, particularly Vietnam and Thailand,” Mr. Pipat explained. If US-China trade talks progress, ASEAN economies, including Thailand, could benefit from shifts in production bases.
Industry-Specific Concerns and Possible Benefits
Paradorn Tiaranapramote, first vice-president of Asia Plus Securities’ research division, noted that Thailand accounts for just 2% of US imports, far less than Mexico (19%), China (17%), and Canada (17%). This suggests Thailand is not an immediate target for US tariffs. However, given its growing trade surplus with the US, concerns remain.
Key Thai export sectors at risk include electronics, electrical appliances, rubber products, automobiles, and machinery. In 2024, Thailand’s trade surplus with the US rose to $35 billion, accounting for 6.6% of the country’s GDP. Mr. Paradorn suggested that negotiations may be necessary to safeguard Thai exports, potentially by increasing imports of US ethanol and agricultural goods while strengthening military ties with Washington.
CGS International Securities (Thailand) head of research, Kasem Prunratanamala, echoed these concerns, noting that higher US tariffs could hit Thailand’s electronics and electrical equipment industries, which make up a substantial portion of exports to the US.
Vietnam, often considered a proxy for China in trade discussions, has an even higher trade surplus with the US and may be at greater risk of new tariffs. However, its economic growth of 6-7% offers a stronger buffer compared to Thailand’s sub-3% growth, noted Saharat Chudsuwan, managing director of Tisco Asset Management.
Policy Responses and Strategic Recommendations
To counter these uncertainties, Thai industry leaders are urging the government to take a proactive approach. Chaichan Charoensuk, chairman of the Thai National Shippers’ Council, called for the establishment of a dedicated “Trump 2.0” trade policy task force. He emphasized the need for immediate discussions upon Commerce Minister Pichai Naripthaphan’s return from the US.
Mr. Chaichan pointed out that sectors such as auto parts could see export opportunities if the US imposes tariffs on Mexico. However, sectors like electronics, electrical appliances, and rubber goods require close monitoring due to rising advance orders.
Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce’s Center for Economic and Business Forecasting, stressed the importance of strategic communication with US policymakers. He believes Trump’s tariff threats are often negotiation tactics rather than immediate actions. While a full-scale trade war seems unlikely in early 2025, it remains a possibility later in the year, particularly if US inflation persists.
The Rising Threat of Chinese Imports
An additional challenge for Thailand is the potential influx of Chinese goods. Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), warned that if China faces export barriers in the US, it may redirect its goods to Southeast Asia, including Thailand.
Since 2020, Thailand has struggled to cope with a surge in low-cost Chinese imports, which have negatively impacted 23 industries, with projections indicating that up to 30 industries could be affected in 2025. Key sectors at risk include steel, textiles, garments, and consumer products.
To address these concerns, the Thai government has introduced measures such as a 7% value-added tax on low-cost imports and stricter industrial standards for online product sales. Business groups have also urged the government to utilize existing anti-dumping laws to curb the impact of cheap imports.
Conclusion
Thailand stands at a crossroads amid escalating US-China trade tensions. While new market opportunities may arise, heightened risks from tariff measures and increased global economic volatility require businesses and policymakers to act strategically. Diversification of trade partners, financial risk management, and government intervention will be key to ensuring Thailand’s economic resilience in the face of ongoing uncertainties.
