Thailand confronts a significant trade hurdle as Trump enforces a 25% tariff on steel and aluminum imports, posing challenges for its export-reliant economy.
Key takeaways
- Thailand faces economic risks as Trump’s 25% tariff on steel and aluminum threatens its export-driven economy.
- The US plans to expand tariffs to more sectors, putting Thailand’s $41.5 billion trade surplus at risk.
- With limited retaliation options, Thailand may need to negotiate or boost US imports to ease tensions.
Thailand is indeed bracing for potential trade challenges as the United States, under President Donald Trump’s administration, rolls out new tariff policies in 2025. With the U.S. being Thailand’s largest export market, accounting for roughly 18% of its total exports last year (valued at around $55 billion), any shifts in U.S. trade policy could ripple through the Thai economy.
The U.S. kicked off this tariff wave on February 4, 2025, imposing an additional 10% tariff on all goods from China, while tariffs on Canada and Mexico (set at 25%) were paused for 30 days after negotiations. Although Thailand hasn’t been directly hit yet, the fear is that it could be next, given its surplus and its role in global supply chains. Thai exports like electronics, machinery, and agricultural products—key drivers of its economy—could face higher duties, potentially shrinking GDP by up to 0.5%, according to some economists.
Thailand’s strategy includes boosting imports from the U.S., like the planned purchase of 1 million tonnes of ethane this year, to narrow the trade gap and ease tensions. But there’s a catch: if tariffs hit, Thai manufacturers might struggle to compete, especially as Chinese goods, diverted by U.S. tariffs, could flood Southeast Asia, undercutting local production. On the flip side, some see an opportunity—Thailand could attract more foreign investment as companies shift production away from China. Still, with Trump’s unpredictable “America First” approach and a looming trade memorandum due April 1, 2025, Thailand’s export-driven economy is in for a bumpy ride. Negotiations and adaptability will be key to dodging the worst of this storm.
The Trump administration has signaled its intent to expand tariff policies beyond metals to sectors such as automobiles, pharmaceuticals, and computer chips. Additionally, Trump has introduced the concept of a “reciprocal tax,” which would impose higher duties on countries with high tariffs on US goods.
These measures pose a concern for Thailand, which was the 10th largest aluminum exporter to the US last year, with exports valued at $270 million.
Trump’s trade policies have already strained relationships with Canada and Mexico and escalated tensions with China, which responded to a 10% US tariff by increasing taxes on American products.
Thailand’s trade surplus with the US stood at $41.5 billion from January to November last year, making it one of the top 10 nations with significant surpluses, an attractive target for potential tariffs.
Import taxes have become a key foreign policy tool, not only affecting trade relations but also shaping broader security and political strategies.
In his first term, Trump escalated tariffs, particularly against China, and replaced the North American Free Trade Agreement with the US-Mexico-Canada Agreement.
While these measures have impacted US trading partners more than the American economy itself, they have also set a precedent for continued protectionist policies.
One approach could involve opening its markets further to US businesses and increasing imports from America.
Major US exports to Thailand include crude oil, machinery, chemicals, and agricultural products such as wheat and soybeans.
If trade tensions escalate, the US Federal Reserve may struggle to cut interest rates beyond the two reductions forecasted for 2025, which could put additional pressure on global and Thai financial markets. There are also concerns that Thailand’s agricultural exports, such as fragrant rice and canned tuna, could face higher tariffs. Some experts suggest Thailand may need to increase its purchases of US products to soften trade tensions.
For instance, Thai Airways could consider buying Boeing airplanes, while the government could enhance military and security cooperation with the US.
Geopolitical factors could further complicate Thailand’s position. Some analysts believe Bangkok could use sensitive political issues, such as the repatriation of Uyghur detainees to China, as leverage in trade negotiations. The indirect effects of US tariffs may also become apparent, as Chinese products flood Thailand’s market if China loses access to US consumers.
