According to Sompop Manarungsan, president of the Panyapiwat Institute of Management, U.S. President Donald Trump’s tariff policy may ultimately strengthen China and signal a trend of relocating manufacturing bases from China to other countries, such as Thailand.
Sompop, an expert on the Chinese and U.S. economies, cautioned the Thai government against hastily entering into agreements with the U.S. and urged a careful assessment of the wider implications.
He noted that while one of Trump’s aims is to limit China’s influence, his primary goal is to bring manufacturing back to the U.S. through re-shoring and on-shoring initiatives. Sompop believes that Trump’s tariffs will likely have a long-term effect of bolstering China because the country has more options compared to the U.S. He highlighted that China’s domestic retail market, valued at $6.9 trillion, far exceeds its exports to the U.S., which were approximately $500 billion last year.
In the immediate future, Sompop anticipated that China would ramp up domestic consumption to offset any potential decrease in U.S. exports, although he does not expect exports to the U.S. to vanish entirely. Even if these exports halved to $250 billion, it would still represent only half a month of consumption in China.
To counter the influx of cheap goods in foreign markets, China is expected to shift its manufacturing to produce goods for import substitution. This allows China to create local production facilities in other countries, avoiding accusations of dumping while exporting these locally made products to markets in the Global South and parts of the Global North.
Sompop pointed out that the U.S., having a population of 340 million and facing higher production costs, will find it challenging to remain competitive in exports in the long run.
He characterized Trump’s economic approach as counterproductive, arguing that the U.S. economy should lean into its strengths in the service and finance sectors rather than trying to reclaim production of raw materials like steel and aluminum.
Over time, he predicts this strategy could further isolate the U.S., calling it a reversal of economic logic.
Sompop also highlighted other vulnerabilities in the U.S. economy, including a stock market valuation significantly higher than the country’s GDP. A decline in the stock market could reduce consumer spending—which constitutes 70% of the GDP—and adversely affect the service sector, leading to potential political unrest.
He warned that while the adverse effects of current policies have yet to be fully realized, they are likely to materialize within the next three to six months. Rising prices could hurt domestic consumption, increasing inflation and limiting the Federal Reserve’s ability to cut interest rates, which would subsequently impact the stock market.
In relation to Thailand, Sompop pointed out that more than ten of the country’s top 15 exports are produced by foreign investors from the U.S., Japan, South Korea, and Taiwan. Consequently, foreign companies in Thailand will likely bear the brunt of U.S. tariffs.
He cautioned that quickly opening the market to U.S. agricultural and livestock products could provoke backlash from farmers, as it might be seen as sacrificing the agricultural sector in exchange for electronic goods.
