The economic landscape of South East Asia, particularly for export-oriented nations like Thailand, has been profoundly impacted by the recent tariff announcements from the United States. When President Donald Trump unveiled steep tariffs on April 2, the region was taken aback, as its economic model heavily relies on exports.
The tariffs imposed were staggering, reaching as high as 49% for various industries, affecting everything from electronics in Thailand and Vietnam to clothing manufacturing in Cambodia. Richard Han, CEO of Hana Microelectronics, one of Thailand’s largest contract manufacturers, described the moment of realization:
“I remember waking up in the morning… I thought: ‘Did I see that right? 36%? How could it be?”
Faced with a daunting 36% levy, Thailand has successfully negotiated a reduction to 19%, joining the ranks of other nations in the region.
Impact on Asean economies
The Association of Southeast Asian Nations (Asean), a bloc of ten countries, exported goods worth $477 billion to the United States in 2024. Vietnam, with exports totaling $137 billion, was particularly vulnerable, comprising about 30% of its GDP. Consequently, the Vietnamese government wasted no time in negotiating a deal, securing a reduction from a punishing 46% tariff to 20%, with claims that it will impose no tariffs on US imports. However, the lack of formal details and the Vietnamese government’s silence on the agreement have raised questions about its validity.
Following suit, Indonesia and the Philippines also negotiated tariff reductions to 19%, although their reliance on US exports is minimal. In contrast, Thailand’s economy is significantly impacted by US trade, with over $63 billion in exports last year. It was crucial for Thailand to act swiftly to address the tariffs, but the political landscape complicated negotiations.
Domestic challenges and negotiations
Unlike Vietnam’s centralized government, Thailand grapples with a fragmented coalition government that is subject to domestic pressures and public opinion. Past decisions unrelated to trade, such as the controversial repatriation of Uyghur asylum seekers to China, have strained US relations, affecting Thailand’s position in trade talks.
The Thai trade delegation faced additional hurdles, particularly with US demands for greater access to Thailand’s agricultural market. The country’s agriculture sector is heavily protected, making the negotiations particularly sensitive. Worawut Siripun, a pig farmer and member of the Thai Swine Raisers Association, voiced concerns, stating,
“US farmers produce on a much bigger scale than us, and their costs are lower. So, the price of their pork will be lower, and domestic farmers won’t be able to survive.”
On the other hand, Thailand’s manufacturing sector, which is vital to its economy, urgently needed a favorable deal. Suparp Suwanpimolkul, deputy managing director of SK Polymer, emphasized the risks associated with the 36% tariff, noting, “If we get 36% then it’s going to be terrible for us.” His company, which produces components for various appliances, stands to be significantly affected by the tariffs.
Electronics manufacturers, contributing a substantial portion of Thailand’s exports, also expressed relief at the tariff reduction. Han explained that a 20% levy would be manageable, as it would function similarly to a value-added tax for US consumers. However, concerns regarding trans-shipment persisted, as US officials have indicated potential scrutiny over products routed through Southeast Asian countries to circumvent tariffs.
Overall, while Thailand’s government has managed to secure a deal, the intricacies of the negotiations and the looming uncertainties surrounding future trade agreements leave many questions unanswered. As Richard Han aptly put it,
“At some point this has to stop. Surely it has to stop? The trouble is, we don’t know what the rules of the game are going to be, so we’re all milling around, just waiting to find out how to play the new game.”
The complexities of global trade mean that many nations, both affluent and developing, continue to grapple with the shifting landscape of international relations and economic policies.