Unfinished Business: Why Thailand’s Tariff Talks Are a Diplomatic Test

It has now been a few months since Trump’s tariffs took effect in August. Thailand, alongside Malaysia, Indonesia, the Philippines, and Cambodia, now faces a 19 per cent tariff, announced shortly after Bangkok signed a ceasefire with Cambodia. Yet trade negotiations with the US remain unresolved, particularly over the possible 40 per cent transshipment penalties that could force regional economies to distance themselves from Chinese supply chains. Bangkok must seek clarity quickly, as the outcome will shape its economic response and diplomatic posture towards both Washington and Beijing. If Bangkok shows any sign of yielding to US pressure or moving to decouple from China, Beijing could retaliate. Thailand can still avoid this, but only through a carefully crafted diplomatic narrative — a dimension still under-discussed at home. 

Trump has floated the idea of  transshipment duties since the start of his reciprocal tariff campaign. Yet this penalty — still not in effect — remains vague in both scope and enforcement. The issue is particularly critical for Thailand and its Southeast Asian neighbours, whose export sectors depend heavily on intermediate goods and components imported from China. A narrow interpretation — targeting only goods imported from China and merely repackaged locally as a clear violation of rules of origin — would limit the damage. But a broader, more punitive approach, allowing only a minimal share of Chinese inputs to qualify as locally produced, could severely hit Thailand’s manufacturing sector. 

On the economic front, Thai manufacturers would need to replace parts and materials imported from China with those produced domestically or sourced elsewhere from the region. Both options would drive up production costs; in some industries, substitution may not even be feasible. Diplomatically, a sudden reduction in imports from China to appease US pressure could invite retaliation from Beijing — a concern already being voiced in Vietnam. Retaliation could range from tightened import regulations, as seen in China’s temporary restrictions on Thai durians, to subtler diplomatic signals. 

Further complicating matters, Bangkok has just signed a rare-earth deal with the US aimed at securing Thailand’s place in the American supply chain. For Washington, the deal is part of a broader effort to reduce dependence on China, which has long dominated the global minerals sector. Although Trump and Xi concluded their own rare-earth deal during bilateral negotiations on 30 October, tensions in this sector are unlikely to be fully resolved. For Bangkok, the US deal may offer greater economic opportunities, yet it also carries environmental risks. More importantly, it carries the danger of creating the impression in Beijing that Thailand is tilting toward Washington. This could prompt China to exert counter-pressure. 

Without decisive political direction and inter-agency coordination, Thailand risks delaying clarity in trade negotiations and missing a crucial moment to define its foreign-policy narrative — a delay that may prove too costly.

These diplomatic repercussions remain under-discussed domestically. The debate still focuses on trade mechanics and economic consequences, while the government treats the tariff issue as a bilateral and technical matter with Washington rather than a strategic challenge involving China. In its policy statement to Parliament on 29 September, the government pledged economic measures to support businesses and farmers affected by US tariffs, anti-dumping measures, and transshipment restrictions. Commerce Minister Suphajee Suthumpun reaffirmed this commitment, vowing to conclude negotiations with the US by the end of the year and to maintain the centralised certification-of-origin system introduced by the previous administration to prevent transshipments. 

Yet nowhere in these statements was the issue framed in geopolitical or geoeconomic terms. The Ministry of Foreign Affairs, though represented on the “Team Thailand” task force led by the Finance Minister, has largely played a coordinating rather than a strategic role. Much of its attention remains absorbed by tensions with Cambodia — a focus reflected in Foreign Minister Sihasak Phuangketkeow’s recent remarks in Parliament and at the United Nations, which centred on border disputes rather than on Thailand’s place in an increasingly volatile world order. What remains is a trade diplomacy detached from a coherent foreign-policy vision and a lacking narrative to define Thailand’s strategic direction. 

This task demands closer coordination across ministries. Tariff negotiations cannot be led solely by ministries of finance or commerce; they require strategic direction from the highest levels, including the Ministry of Foreign Affairs. Yet with the current administration pledging to remain in office for only four months, there is little room to articulate – let alone anchor – Thailand’s long-neglected strategic posture. At the same time, Prime Minister Anutin’s government is preoccupied with domestic politics pressures stemming from a fragile coalition. Together, the limited timeframe and these competing priorities risk causing Thailand to miss a crucial window to define its foreign policy strategy. 

Navigating tariff negotiation while rethinking Thailand’s diplomatic position is a demanding but necessary task. In the short term, pursuing further diversification under US tariff pressure without articulating a clear strategic rationale risks inviting countermeasures from China, particularly if such moves are seen as reactive rather than part of a coherent economic strategy. China is Thailand’s largest trading partner and a major investor in the country.

A narrative of self-strengthening through economic restructuring – not decoupling – can help mitigate potential backlash from Beijing. In the long run, this process will help to clarify Thailand’s own conception of national interests: what it seeks, where it stands, and how far it is prepared to manage pressure from both sides. This clarity is essential not only to avoid being perceived as tilting toward Washington but also to prevent Thailand from defaulting to appeasement in the face of pressure from Beijing. 

All in all, Thailand’s tariff negotiations with Washington remain unfinished business. How the current and future governments handle them will determine not only the shape of the final deal but also whether Thailand can turn external pressure into strategic clarity at home. Reducing dependence on Chinese supplies need not invite confrontation — if it is framed as strengthening Thailand’s economic security and expanding its room for manoeuvre, rather than aligning with any one major power. Handled deftly, Thailand can turn external pressure into an opportunity to reaffirm autonomy and project diversification as resilience, not alignment.

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