Amid rising US-China trade tensions, Experts analyze impacts on Thailand

Affected Nations Unite Against Trump’s Tariff Policy

Assoc Prof Sompop Manarungsan, President of Panyapiwat Institute of Management, told that Trump’s tariff policy targeting trade surplus nations will likely drive affected countries to strengthen cooperation. Notably, Canada has aligned with the EU and Japan, signalling a broader movement opposing Trump's trade measures.

As nations adapt to rising trade barriers, many are prioritizing domestic economic growth and seeking new trade and investment partners—reducing reliance on the US.

The 25% tariffs on steel and aluminium imports will not only impact targeted countries but also US consumers, leading to higher prices for cars, refrigerators, and other goods. This inflationary pressure makes it harder for the Federal Reserve (Fed) to lower interest rates.

Unlike Mexico, Canada, and Brazil, Thailand is not directly affected by these tariffs. Canada, for instance, exports 60-70% of its aluminium to the US, while South Korea hosts major steel mills—both facing significant challenges.

Trump’s move to protect the U.S. steel industry also has political motivations, as Pennsylvania, home to large steel mills, plays a crucial role in the Electoral College.

Assoc Prof Panithan Wattanayagorn, a foreign affairs and security expert, analyzed the potential consequences of US policies. He stated that in the short term, the tariff barriers may not help consumers buy cheaper goods. On the contrary, businesses may shift the burden to consumers.

In the medium term, the US may delay the implementation of certain tax increases, as seen with Canada and Mexico. The delay could be tied to social and security policy conditions, using them as leverage to pressure trading partners into not retaliating with policy changes.

In the long term, if there are continued retaliations, many countries may opt to produce goods domestically or rely more on their own countries. However, the extent to which this will happen is still uncertain.

"If the back-and-forth continues for a long time, there is a risk of a global economic recession, similar to what happened in the 1930s when tariff barriers were exchanged back and forth, involving thousands of products. During Trump's first term, it also happened when tariffs caused American farmers to lose billions of dollars in revenue, and the Trump administration had to find funds to subsidize the farmers to prevent harm. Therefore, if this continues, the consequences are unpredictable, especially since the situation is much more intense than before," Panithan said.

Global Trade Economic Structure Changing

Panithan believes that in the short term, structural changes are likely to occur, and the US should be aware of this, as many countries will start to reduce their reliance on the US, especially regarding concerns about using the US dollar as the primary global currency. These countries may turn to other currencies with lower risks instead.

"The shift to other currencies by China will become more appealing if President Trump intensifies his threats. The idea of relying on other currencies or the development of a financial system by the BRICS countries could also gain traction. If China feels that the situation worsens, it will likely move forward with creating a system independent of the US, and this could happen even sooner than expected. This is an interesting development because if many countries follow suit, it could lead to a significant transformation in the global economic system."

However, at present, the global economic and trade landscape remains complex. The tariff increase by China against the US is still symbolic, as the value of the tariffs is relatively small. China is likely not to retaliate as strongly as the US has done, since for some products, China still relies more on the US than vice versa.

Recommendations for Thailand's Government Preparedness

Panithan evaluates that there are three key areas the Thai government must prepare for in light of current developments. These are outlined as follows:

• The government must develop measures to mitigate the impact on businesses, especially if Thailand is listed among the countries affected by US policies. Instead of demanding or negotiating with the US, the government should focus on reducing negative effects and finding new alternatives. Current trends and the overall atmosphere are not favourable, and there is considerable uncertainty regarding morale and direction.

"The government should establish clear measures to minimize these impacts. Eventually, a financial cushion will likely be needed to address the situation, reduce costs, and support those most affected," Panithan said.

• The government must adopt a more proactive stance, utilizing Thailand’s expertise in international negotiations. For instance, engaging in discussions on security issues or leveraging international politics could be key. The US also has significant interests in Thailand, such as in the safety of the Mekong River, military exercises, and the maintenance of aircraft carriers. If Thailand uses its expertise to negotiate, it could lead to beneficial outcomes and evolve into a more strategic policy approach.

 

• Thailand must seriously consider new alternatives, especially in the long term, even if President Trump is no longer in office. The country may need to strengthen its bargaining position. If the US threatens Thailand, the government must learn to respond assertively. For example, if the US prevents Thailand from joining BRICS, the US must provide a counteroffer. Thailand has never engaged in such intense negotiations, but if it doesn’t start, it risks missing opportunities.

"Before addressing these three points, Thailand should leverage its negotiation skills, observe the situation closely, and assess the appropriateness of its actions. The US and the global stage may never be the same again," Panithan said.

Thailand's Adaptation to the Global Value Chain

Buranin Rattanasombat, President of the Marketing Association of Thailand (MAT), highlighted the significant impacts of Donald Trump’s policies, particularly on trade and exports. The US's trade policies, which focus on raising tariffs on imports from China and other countries, have increased uncertainty for Thai exports to the US, especially regarding the varying tariffs on Thai and American goods. This makes Thai exports to the US more difficult and could lead to higher costs.

Simultaneously, increased competition in the market will require Thailand to adapt in order to maintain its global competitiveness. As Chinese products that were previously excluded from the US market may flow into Thailand, the country’s industrial structure will increasingly focus on production. Given the uncertainty in trade policies, Thailand’s manufacturing sector is likely to be more affected than the trade and tourism sectors, which remain primarily based on contract manufacturing and exports. This uncertainty also makes it more difficult to make investment decisions in Thailand.

"Trump’s policies not only impact the US and China but also have significant effects on the economies of other countries, including Thailand, altering the landscape of global trade," Buranin said.

However, the strength of the US lies in its status as the world’s most important financial hub, its leadership in innovation and technology, its influence on global trade systems, its large consumer market, and its role as a major global investor. These factors contribute to the flow of foreign capital, supporting economic growth.

In the past, the US and China were mutually dependent, but with the shift toward competition, China now leverages its strengths as a key global manufacturing hub. It offers low production costs and the ability to produce goods in large quantities efficiently, allowing China to quickly meet global market demands. Additionally, China’s heavy investment in infrastructure contributes to economic growth, industrial innovation, and a large population, creating a high-potential consumer market.

Advice for Thai Entrepreneurs to Adapt and Compete

To remain competitive and thrive in a rapidly changing economy, Thailand needs to make several adjustments in key areas. One of the most critical sectors is the development of agricultural and food products. By enhancing quality and creating valuable brands, Thailand can better compete in the global market. Additionally, the tourism industry, where Thailand serves as a major hub, should continue to be a driver for economic growth.

Furthermore, adopting technology and innovation in both manufacturing and services will increase efficiency and competitiveness. The use of AI for data analysis will allow businesses to respond quickly to market demands. Additionally, developing a strong "Made in Thailand" brand with a focus on valuable marketing will make Thai products more appealing and competitive internationally.

"Thailand must position itself as part of the Global Value Chain, not just the Supply Chain. We need to make the world recognize that they can't do without us, and there must be trade collaborations, both at the national and global levels," said Buranin.