Economists Warn of Trade Pitfalls for Thailand as US-China Tensions Ease

Experts caution that a temporary truce between Washington and Beijing could leave Bangkok struggling to compete in the global marketplace

 

A fragile truce in the trade spat between the United States and China could spell trouble for Thailand if it fails to swiftly secure favourable trade deals, economists have warned.

 

Experts suggest the recent agreement between the two economic giants is a temporary respite rather than a lasting resolution, with the underlying tensions still carrying the risk of escalating into a technology or currency war down the line.

 

The crux of the issue for Thailand lies in its ability to negotiate import tariffs with the US that are on par with regional competitors such as Vietnam and Malaysia. Should Thailand fail in this regard, analysts fear that international investors may overlook the country as a primary base for production and exports.

 

Concerns are mounting that Thailand could become a less attractive option for investors if other nations in the region forge successful trade agreements with the US while Bangkok lags behind in negotiations.

 

This delay could relegate Thailand to a "second-tier choice" in the eyes of both Chinese and American investors.

 

Economists are urging the Thai government to urgently formulate a proactive strategy, particularly within key sectors like automotive, pharmaceuticals, steel, and technology.

 

This strategic push is deemed essential to mitigate the risk of Thailand being sidelined in the global trade arena.

 

Amonthep Chawla, Assistant Managing Director and Head of Research at CIMB Thai Bank, described the temporary accord between "Donald Trump" and China as a qualified positive for investors.

 

However, he questioned the long-term stability of these encouraging signs, citing a lack of "confidence" that both sides would maintain a cooperative stance.
  

He highlighted the protracted conflict between China and the US, framed within the context of "strategic competition," where the US aims to curb China's future influence as a key rival.

 

Given China's potential for continued growth at 4-5% annually, compared to the US's 2%, Amornthep noted the strong likelihood of China soon becoming the world's leading economy.

 

Consequently, he believes the US will remain determined to impede China's progress through various means, including tariffs, non-tariff barriers, and investment policies, raising the spectre of the trade war evolving into other forms of conflict, such as technological or currency battles.

 

 

Thailand Navigating a Risky Trade Landscape

From Thailand's perspective, while the potential for manufacturers to relocate from China to ASEAN countries presents an opportunity, it is not without its challenges. The Thai government must act decisively and with clarity.

 

The issue of import tariffs on Thai goods entering the US is particularly critical and could become a significant "obstacle" if the negotiated terms are not as favourable as those secured by regional competitors like Vietnam or Malaysia.

 


"If the US reduces tariffs on China to 30% while Thailand still faces a 36% levy, we will be at a disadvantage," Amornthep explained. "Vietnam, for example, might negotiate a better deal with lower tariffs than Thailand, making them a more attractive choice for investors. Even if Thailand secures a mid-range tariff of 15%, but our competitors achieve lower rates, our competitiveness will undoubtedly suffer."
 
 

The urgent task for the Thai government is to pursue trade negotiations with a clear direction to avoid Thailand becoming a "second-tier option" for investors from either China or the US.

 

This is particularly vital for key manufacturing sectors such as automotive, pharmaceuticals, steel, aluminium, and security-related technology, where Thailand needs to adopt a clear, proactive, and regionally competitive approach.

 

 

US and China Both Feeling the Strain

Pipat Luengnaruemitchai, Chief Economist at Kiatnakin Phatra Financial Group (KKP), characterised the current situation as a temporary "ceasefire" indicating that "both sides are feeling the pinch," rather than a sustainable resolution.

 

He described it as a "reset of the board" to allow time for further talks, not a signal of an end to the conflict.

 

Over the next 90 days, he stressed the importance of monitoring the initiation of "actual negotiation," which has yet to commence, particularly on critical issues like the control of precursor chemical exports for narcotics, a point of pressure from the US on China.

 

Concrete efforts from China in this area could potentially lead the US to reduce some of the existing tariffs.

 

While the temporary easing of tensions may alleviate some pressure on the global economy and reduce the risk of recession in the US, Pipat noted that the impact on Thailand may not necessarily be positive.

 

If the US reduces tariffs on China to just 10%, matching Thailand's current rate, Thailand loses a key advantage. Previously, the expectation was that higher tariffs on China (e.g., 30-40%) compared to Thailand's 10% would make Thailand a more appealing investment or export destination for the US.

 

However, if China manages to reduce its tariffs to the same level as Thailand's, this advantage disappears immediately.

 

Furthermore, bilateral trade negotiations between Thailand and the US have not shown significant progress.

 

In contrast, regional competitors such as Japan, India, Singapore, South Korea, and Vietnam have actively pursued and secured some trade agreements with the US, increasing the risk of Thailand being "left behind" and intensifying direct pressure on the Thai side.

 

Thailand faces a clear risk of being in a disadvantageous position.

 


"The worst-case scenario is that China manages to negotiate favourable terms across the board, but we fail to do so, and we end up facing a 36% tariff while China's is at 10%. That would be a disaster for us," Pipat warned.


 

Naris Sathapholdeja, President of Data and Analytics at TMB Thanachart Bank (ttb), highlighted that the agreement between China and the US, particularly for "Thailand," could represent a "new risk" if other ASEAN nations secure deals with the US before Thailand makes tangible progress.

 

If countries in ASEAN, such as Vietnam, Indonesia, or even Singapore, successfully negotiate trade benefits in the near future while Thailand lacks a clear stance, this is a "worrying" situation, especially given the multiple pressures already facing the Thai economy.

 


"This period will be tough, but not as dire as COVID because there are no lockdowns or economic shutdowns of that scale. However, we will face a prolonged period of strain, rather than a sudden collapse like in 2020," Naris said. 


 

Burin Adulwattana, Managing Director of Kasikorn Research Center, characterised the current situation as a pause, not an end to the conflict.

 

While this may provide some breathing room, long-term uncertainty persists throughout Trump's potential tenure, with the possibility of renewed tariff increases.

 

He highlighted the noteworthy shift in US strategy, which involves not only a temporary de-escalation with China but also active engagement in trade negotiations with other countries, including the United Kingdom, Indonesia, and Vietnam.

 

These negotiations reportedly include implicit conditions of being "exclusive of China" or avoiding Chinese involvement in certain parts of the supply chain, suggesting continued pressure on China from various angles.

 

Therefore, there is significant concern that while several ASEAN countries, such as Vietnam and Indonesia, have already commenced negotiations with the US, Thailand has yet to demonstrate clear progress.

(2025/05/14-00:00)