The New Anutin Government Should Reset Thailand’s Trump Tariff Response

Although Thailand reached a tariff agreement with the Trump administration in early August 2025, the Thai government had already rushed to respond in May by redirecting funds from the Digital Wallet cash transfer scheme into economic stimulus packages. The government’s initial response was anti-recessionary, channelling substantial funds to cushion against potential low economic growth. Equally important, yet less emphasised, is the need for a long-term strategy to support structural transformation. The new government should move beyond such ad hoc spending and instead adopt a targeted strategy that prioritises manufacturing sectors where Thailand holds real advantages, while also improving the business climate.

The economic stimulus initiative designed to counter US tariffs totals 157 billion Baht, accounting for about 19 per cent of the government’s central fund budget in fiscal year 2025. The first phase, worth 115.4 billion baht, focused heavily on infrastructure, with 39.1 billion baht for water projects and 45.9 billion baht for transportation, together accounting for nearly 74 per cent of the budget. The remainder went to tourism (10.1 billion), community development (9.2 billion), and exporting sector support (11.1 billion), including 10 billion baht in loans for SMEs. The second phase, totalling 18.5 billion baht, allocated 10 billion baht to the Board of Investment (BOI)–managed Competitiveness Enhancement Fund for 13 targeted industries such as smart electronics, next-generation automotive, defence, and high-value food processing, while the remainder went to the Student Loan Fund.

The budget is sizable enough as an initial response to Trump’s tariffs. The question is not how much, but how well it is spent. Priority should fall on the sectors most vulnerable to tariff shock and in line with the country’s comparative advantage. While negotiations continue, the trade deal already entails major Thai concessions, including broad tariff exemptions, increased investment in the US, and higher imports of US agricultural and energy products. On top of this, the US has imposed a 40 per cent transhipment threshold, with penalties for goods suspected of evading rules of origin by routing through third countries.

Electronics and automobiles are especially exposed to this scrutiny because they rely significantly on imported parts and components. According to TINA’s estimate, Thailand could lose up to USD 17 billion (540,000 billion Baht) in exports, equivalent to a 5 per cent decline. Manufactured goods are expected to bear the sharpest losses. Yet, most stimulus funding has gone to transport infrastructure, especially in remote, less developed areas. This allocation may cushion short-term recessionary pressures but contributes little to long-term structural transformation. While funding for counter-recessionary stimulus has been substantial and clearly articulated, resources for long-term structural transformation remain largely absent.

Electronics and automobiles are also critical to the Thai economy. In 2023, these two sectors together accounted for about 6.5 per cent of GDP, nearly one-fourth of manufacturing output, and employed roughly 1.5 million workers. Their importance extends beyond production figures, as they also anchor upstream and downstream industries, from parts suppliers to logistics and services. Yet, despite being among the BOI’s targeted industries, electronics and automobiles received only 10 billion baht—an amount that must also be divided among several other BOI-targeted sectors. Consider the electronics sector. With semiconductors at its core, the industry requires roughly 50 billion baht for wafer fabrication plants and a long-term commitment of 10 billion baht per year for at least two decades to develop a sustainable value chain in Thailand.

Redirecting funds to strengthen the competitiveness of local firms in electronics and automobiles would deliver far greater long-term benefits and align with ongoing developments in these sectors. Recent years have seen Thailand attract notable global manufacturers in these industries, including Germany’s Infineon, China’s Victory Giant Technology, and Taiwan’s Gold Circuit Electronics. Three major Chinese automakers (MG, BYD, and Great Wall Motor) also established large manufacturing facilities in the country. These investments signal international confidence in Thailand’s production base. For an immediate and medium-term response to the Trump tariff, measures such as soft loans and machinery import support can help firms adjust to external shocks and remain competitive.

Even though its tenure may be brief, the new Anutin government has assumed office at a critical juncture.

For longer-term reform, Thailand should formulate a national strategy for electronics and automobiles. Delay would risk falling behind neighbouring competitors. Vietnam and Malaysia have already intensified their push: Malaysia has pledged US$250 million over the next decade to acquire Arm Holdings’ chip design operations, while Vietnam has launched a US$500 million national semiconductor strategy. Thailand should leverage competitiveness in electronics and automobiles and aim to position itself as a regional hub for higher value-added activities such as printed circuit board assembly, design, testing, and packaging. This requires not only subsidies but also proactive FDI policies—targeted incentives, streamlined approval processes, and leveraging the Eastern Economic Corridor to attract multinational enterprises—alongside broader reforms to strengthen political stability, openness, property rights, contract enforcement, and infrastructure. Without decisive action and credible long-term commitment, the country risks falling behind regional competitors.

Human capital is another long-term challenge, particularly in supporting growth in electronics and automobiles. While the stimulus package allocated 8.5 billion baht to the Student Loan Fund (SLF), this measure does little to address the country’s structural needs. Thailand’s bottleneck is not enrollment but the shortage of highly skilled technical and managerial manpower necessary to move into higher value-creating segments of global value chains. The real priority is upgrading workforce quality and reducing skills mismatches in the labour market—objectives unlikely to be achieved through student loans alone. The SLF plays an important role in widening access to higher education, but it does not address the core problem of skills mismatches.

Public resources would be better directed toward programs such as vocational and technical training, industry-linked apprenticeships, and targeted programs in STEM and advanced manufacturing skills. In addition, the stimulus does not allocate resources for unemployment support. Since Thailand’s social security system faces structural stress and requires reform, channelling additional resources into social security would deliver coverage to workers in all sectors, ensuring a more inclusive response than industry-specific subsidies.

While many governments in developing countries remain in a wait-and-see mode amid uncertainty over Trump’s policies, the Paetongtarn government acted quickly with counter-recessionary stimulus. Yet, its response concentrated largely in the infrastructure sector and fell short of supporting the sectors most directly affected or advancing long-term structural transformation.

Even though its tenure may be brief, the new Anutin government has assumed office at a critical juncture. It should seize this opportunity to prioritise strategic industries, adopt a coherent long-term plan, and more effectively prepare Thailand for the adverse impacts of Trump’s tariffs.

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