Thai exports to the United States are expected to be the most seriously affected in Southeast Asia based on potential US tariff increases, as Thailand has a significant share of trade with the US, according to ttb analytics.
The research house of TMBThanachart Bank (ttb) said that once Donald Trump is sworn in as president, Washington is expected to introduce several aggressive policies, including significant increases in import tariffs. This scenario is expected to affect at least 25% of Thailand’s total exports to the US.
Under a Trump administration, the US could potentially increase global import tariffs to around 20%, up from an average of 3% during the pre-pandemic period. Tariffs on Chinese goods might rise even more significantly, potentially reaching 60%, compared with the previous average of 21%, noted ttb analytics.
The US is Thailand’s top trading partner. In 2023, Thai exports to the US amounted to $47.9 billion, representing 17.1% of the country’s total exports. However, Vietnam remains the top regional exporter to the US with a share of 29.5%.
“Electronics and communication equipment, which are closely linked to Chinese supply chains, are expected to bear the brunt of the impact. These goods account for about 25% of Thai exports to the US, or 4.3% of Thailand’s total exports,” ttb analytics reported.
Key products such as solar panels, where Thailand is the second-largest supplier to the US, are particularly vulnerable. However, hard disk drives are expected to face a limited impact as Thailand remains the world’s leading manufacturer of these products, noted the research house.
In addition, Thailand’s structural economic challenges and trade policies are likely to weaken its export performance amidst rising geopolitical risks and US-China trade tensions.
A glut of Chinese products, spurred by US tariffs, is expected to flood the Thai market, disrupting local production and exports, according to ttb analytics.
Thailand trails regional peers Vietnam and Malaysia in attracting foreign direct investment (FDI), especially in critical growth industries such as semiconductors. Since 2018, Thailand has drawn just $55 billion in net FDI inflows, the lowest in the region.
In contrast, Vietnam benefits from bilateral and multilateral free trade agreements (FTAs), such as those with the EU and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, providing enhanced access to alternative markets.
To address these mounting challenges in the export sector, ttb analytics advised the Thai government to urgently negotiate with the incoming US administration to mitigate adverse effects and expedite FTA negotiations. Policies aimed at supporting the private sector are essential to enhance competitiveness and attract FDI.
Local businesses should adapt their strategies, strengthen their competitiveness, and explore new markets to reduce long-term risks from a trade war, noted the researcher.