Thailand faces a 37% tariff rate on all exports to its largest market, the US, following the announcement of global ‘reciprocal tariffs’, putting its economy at risk of a 1% loss of GDP. Simultaneously, a surge in Chinese imports looking for new markets is adding pressure, raising concerns about exacerbated economic strain.

US President Donald Trump’s so-called reciprocal tariffs announced on Wednesday (2 April) have caused consternation worldwide, with Southeast Asian countries among the hardest hit. Thailand itself faces a 37% tariff rate. Importantly, the US has long been Thailand’s largest market.

According to the Office of the US Trade Representative, Thailand’s trade surplus with the US totalled US$45 billion last year, the 11^th largest among countries with a trade surplus with the US. The US imported US$63 billion worth of Thai goods, while its exports to Thailand were merely US$17 billion.

Reports indicated that the US justified the tariff by alleging that Thailand imposed a 72% tariff on American products. However, this figure is not an actual tariff imposed on American imports into Thailand but rather a calculation based on the US’s trade deficit with Thailand divided by Thailand’s total imported value to the US.

Initially, Thailand appeared on Trump’s tariff chart with a 36% tariff rate. However, according to the Executive Order Annex I, it was readjusted to a 37% rate, giving Thailand the 13^th highest tariff among nations affected by the elevated tariff.

The Commerce Ministry revealed that 15 products exported to the US will be severely affected, including electronic parts, vehicle components, semiconductors, jewellery and accessories, and agricultural products.

Thai government ready to talk

In response to Trump’s policy, Prime Minister Paetongtarn Shinawatra said on Thursday (3 April) that she would negotiate with the US to recalibrate a more reasonable tariff.

“The figure announced by the US is calculated from the maximum tariff rate set for certain products. On average, the tariff rate for importing goods from Thailand to the US is only about 9%. Therefore, the government has to negotiate to restructure the tariff, making it reasonable,” said the PM.

The ‘reciprocal tariff’ according to the Office of the US Trade Representative is calculated on the basis of trade imbalances which are assumed to occur due to ‘tariff and non-tariff factors’. This assumes, falsely, that nothing else can result in a trade imbalance (such as natural resource availability, labour costs, etc.) In other words, the calculation is NOT based on ‘reciprocating’ the Thai tariffs on imports from the US.  The USTR gives the formula for calculating the reciprocal US tariff:

The formula for calculating the reciprocal US tariff

This is a blatant attempt to blind with pseudo-science. The calculation simply divides the trade imbalance by the total value of goods expressed as a percentage, halves that figure and rounds it up. Economists have described this method of calculation as ‘idiotic’, ‘flawed’, ‘absurd’ having ‘no economic rationale’ ‘insane’, etc.]

In the long term, the PM suggested that Thai entrepreneurs look for new potential markets to reduce reliance on the US market. The Thai government was prepared to implement support measures for Thai exporters whose main market is the US.

The PM’s official statement also stated that Thailand had been ready to discuss with the US government before Trump was officially inaugurated. Over the past three months, Thailand has prepared a comprehensive trade proposal to encourage the US to enter negotiations.

Meanwhile, Commerce Minister Pichai Naripthaphan said Thailand had been seeking talks with the US since January, but the US government has yet to respond. He emphasised that the Thai government is prepared to expedite negotiations.

Pichai Naripthaphan

He also remarked that the government outlined three potential measures in response to the tariff: reducing the Thai tariff on some products to create a trade balance with the US, importing key US products that Thailand has never before imported, and easing certain trade barriers to facilitate US exporters.

Fears grow over Chinese imports flooding Thailand

Beyond the direct impact of US tariffs, analysts warn that the situation could worsen due to an influx of cheap Chinese imports into Thailand.

Since the US-China trade war in 2018, US protectionist measures have been implemented against China, forcing it to divert to other markets to mitigate its oversupply of products. Thailand has been one of the countries affected by the trade war.

Thailand has recorded a trade deficit with China for over two decades, which worsened in 2024 to 1.6 trillion baht. The influx of cheap Chinese goods and Chinese businesses in Thailand has significantly accelerated in recent years and is considered one of the main factors affecting the whole Thai economy and SMEs.

On Wednesday, Trump announced a 34% tariff on China, on top of the 20% tariff he imposed last year, bringing the total levies on China to 54%. It is predicted that more surplus goods from China would flood in Thailand and other countries.

Kiatanan Lounkaew of the Faculty of Economics, Thammasat University, revealed that Trump’s reciprocal tariffs will disrupt global trade, making it difficult for Thailand to export to other countries. A real threat is China’s oversupply of goods, which could be dumped into Thailand. This could devastate Thai SMEs, which are already struggling with lower-priced competition.

In addition to negotiating with the US, he suggested the Thai government must implement a strict trade policy and regulations to prevent an influx of goods from other countries.

GDP expected to shrink by 1%

According to KKP Research Centre, Thai export growth in 2025 is likely to shrink by 0.5% from the previous estimate of 2.5% due to the 37% US tariff on Thai products, which is significantly higher than the expected 10%.

Thai exports to the US are expected to shrink by 10% in 2025 due to a significant decline in US demand for Thai products, especially in product groups where Thailand relies heavily on the US market, such as electronic parts, electrical equipment, automotive parts, tires, food (rice, fish, shrimp, pet food).

The think tank indicated that Thai exports to other markets, especially automobiles, electronic parts, and furniture, are likely to face increased competition, notably from China.

Private investment is expected to slow down while household consumption and the tourism sector will also face pressure due to the earthquake.

However, the impact of the tariff war remains uncertain, depending on each country's negotiations with the US, which could lead to future adjustments. 

Overall, the research initially assessed that Thailand’s GDP growth is projected to shrink by 1%, down to 1.4% from 2.4% last year. It was also believed that the Thai economy will slow down significantly in the second half of this year.