Trump 2.0: Dual Challenges for Thailand’s External Sector

Since August 2025, Thailand has faced 19 per cent reciprocal tariffs imposed by the US under the International Emergency Economic Powers Act (IEEPA). This rate is slightly above the 15 per cent average applied across affected countries, but remains lower than those imposed on several emerging economies, including India, South Africa, Brazil, and particularly China, which faces average tariffs around 47 per cent. The impact on Thailand’s exports will differ across sectors and products, depending on tariff sensitivity and exemption status. At the same time, import surges have become a growing concern, driven by China and other countries pursuing export and investment diversification in response to the US trade measures. Accordingly, government policies must be strategically designed to address these dual challenges in order to cushion the Thai economy from the fallout.

Recent export data for Thailand, covering August and September 2025, when the Trump 2.0 tariffs took effect, indicate a slowdown in US-bound shipments across several product categories. These include, for example, certain types of air conditioners, dishwashing machines, solar cells, rubber products, women’s & girls’ slips & nightdresses, jewellery, rice, and frozen & processed crustaceans (Figure 1). This suggests that in several product categories, Thailand is encountering difficulties in expanding exports to the US market, a pattern previously observed during both the Trump 1.0 period and the Biden Administration. That said, part of the decline in export growth may be attributable to frontloading in anticipation of new tariffs taking effect.

Some of these products are also facing additional trade measures that further constrain exports to the US. For instance, electrical appliances are now subject to tariffs under Section 232, following the proclamation of a 50 per cent tariff on selected household items containing steel and aluminium. Anti-dumping (AD) and countervailing duties (CVD) have been imposed on processed crustaceans and solar cells. Taken together, this means that many Thai exporters in these sectors may struggle to compete in the US market, particularly in cases where tariff rates are less favourable relative to those of competitors, or where demand is highly sensitive to price and income fluctuations.

Slowing Down

Figure 1: Thailand’s Export Growth in the US Market, 2025 (year on year, in %)

However, export growth is evident in various sectors, including electrical machinery & equipment, selected apparel products, and furniture, where export growth to the US has remained strong. Key factors supporting this growth include US tariff exemptions on products such as hard disk drives, reception machines, and semiconductors & semiconductor media, along with exporting firms’ willingness to accept lower profit margins to maintain market access. Moreover, export expansion has been reinforced by investment relocation to Thailand, particularly from China and Taiwan, which continues to drive export diversion toward the US market.

Yet, this pocket of resilience may be overshadowed by a broader set of challenges on the import side. Recent trade data indicate a continued surge in shipments from China to Thailand. During the first nine months of 2025, imports from China rose sharply by approximately 33 per cent, compared to a 10 per cent growth rate during the same period last year (Figure 2). Imports from Taiwan have risen even more significantly following the implementation of the tariffs. Chinese imports, which include a mix of finished goods and intermediate parts, are being driven by both export rerouting from the US due to trade measures and investment relocation to Thailand. In contrast, Taiwanese imports, consisting mainly of parts and components, are primarily driven by investment relocation. Imports from ASEAN and the US have also increased, though at a more moderate pace, averaging around 10 per cent.

Import Surge from China

Figure 2: Thailand’s Import Growth from Key Partners, 2025 (year on year, in %)

Given the potentially slower pace of export diversion to the US under Trump 2.0 tariff policy, government efforts should prioritise promoting and facilitating market diversification. Early evidence suggests that this strategy is already cushioning the adverse impacts of the Trump 2.0 tariffs in certain sectors such as frozen & processed crustaceans and jewellery, where positive growth in global markets persists despite declining exports to the US. This has helped to sustain Thailand’s overall export performance.

As deglobalisation persists and trade liberalisation through multilateralism remains sluggish, promoting market diversification through existing Free Trade Agreements (FTAs) and direct bilateral cooperation should serve as the second-best solution. At the same time, efforts to expand into new markets should be implemented simultaneously. Several new FTAs, including Thailand-EU, could be proactively pursued with national interests preserved. To ensure these FTAs are effectively realised, their conditions, particularly tariff quota allocations and rules of origin requirements, must be carefully considered.

Equally important, recognising that tariff impacts vary significantly across sectors, the government should leverage micro-level data to assess the effects of tariffs more precisely and design targeted support measures, including financial support. Generic, broad-based interventions risk misallocating resources and missing opportunities to support industries that are truly vulnerable or ripe with genuine growth potential.

Given the potentially slower pace of export diversion to the US under Trump 2.0 tariff policy, government efforts should prioritise promoting and facilitating market diversification.

Finally, to ensure that the surge in imports contributes positively to the domestic economy, policies aimed at strengthening local supply chains must be implemented without delay. The top priorities should focus on enhancing hard and soft infrastructure, especially human capital development and digital advancement, as well as adopting a clear, coordinated industrial policy. These measures are crucial not only for reinforcing local supply chains but also for boosting the country’s overall competitiveness.

Ultimately, regardless of the legitimacy of the Trump 2.0 tariff policy under the IEEPA, enhancing national competitiveness and promoting market diversification are essential to ensuring the resilience of Thailand’s external sector amid global uncertainty.

2025/361