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BANGKOK: US President Donald Trump’s “Liberation Day” tariffs is a nightmare for trade-oriented economies, including Thailand. In response, the Thai government has prioritised increasing imports from the US and diversifying export markets.

While the 90-day pause of tariff escalation offers significant relief, it risks fostering complacency, as the government’s current approach may prove inadequate.

The new US tariffs come as a shock to many for two key reasons. First, it imposes tariffs on imports from nearly all countries.

Second, the tariff rates are substantial when compared to the US’ current Most Favoured Nation (MFN) weighted average. Thailand now faces a 36 per cent tariff. Cambodia faces a 49 per cent tariff, Laos 48 per cent and Vietnam 46 per cent. Even with the 90-day pause in tariff escalation announced on Apr 9, a new minimum rate of 10 per cent remains in effect for goods imported from all countries.

The impact will be especially severe for trade-dependent developing countries like Thailand. Since the late 1970s, trade has driven rapid economic growth and structural transformation in Thailand, shifting labour from agriculture to manufacturing and services.

A distinctive feature of Thailand’s trade regime is its ability to create jobs through labour-intensive manufacturing exports. Since 1990, liberal trade and investment policies, along with lower transport and communication costs, have deepened Thailand’s integration into global value chains. Today, the country is a major hub for the automobile and electronics industries.

THAILAND VULNERABLE TO US POLICY SHIFTS

Against this backdrop, Trump’s tariff hikes will have a major impact on Thailand’s economy. The US is its largest export market, accounting for about 17 per cent of total exports. Thailand has long maintained a trade surplus with the US, and exports remained strong even during the COVID-19 pandemic, highlighting their deep economic ties.

As Sino-US trade frictions intensified, many goods exported from Thailand to the US between 2018 and 2022 were products which had been previously sourced from China. This includes electronics appliances, air conditioners, hard disk drives, photosensitive semiconductors and image sensors.

More importantly, Thailand is heavily reliant on the US market for many products. My calculations show that around 10 per cent of Thai exports shipped to the US derive over 50 per cent of their total export value from the US market. This group spans a wide range of products, including new pneumatic tyres, refrigerators and photosensitive semiconductor devices.

This heavy reliance makes Thailand highly vulnerable to US policy shifts, regulatory changes, and broader economic disruptions.

INCREASING IMPORTS UNLIKELY TO IMPROVE THAILAND’S SITUATION

Similar to other developing countries such as Vietnam and Indonesia, the Thai government has turned to increasing imports from the US. Whether a more balanced trade relationship is a meaningful objective is another matter, but increasing imports alone is unlike to significantly improve Thailand’s position.

This is because Trump’s concern over the trade deficit may not just be about the numbers, but more fundamentally about trade barriers.

Just days before Trump announced the “Liberation Day” tariffs, the Office of the United States Trade Representative released the 2025 National Trade Estimate Report on Foreign Trade Barriers. The report outlines measures and policies of about 60 trading partners that restrict, prevent, or hinder the international exchange of goods and services.

For Thailand, trade barriers include both tariffs (particularly on agricultural goods) and non-tariff barriers such as import bans, licensing requirements, tariff-rate quotas, import permit fees, and a controversial incentive system for customs officials who initiate investigations or enforcement actions.

Additionally, technical barriers to trade remain in place for many products, for instance, dairy products, animal-derived products, and beef. Though Thailand is not alone in maintaining these trade barriers, they appear more problematic when considered alongside the growing trade imbalance between Thailand and the US over the past decade, which stands out both in its scale and pace of growth.

All this suggests that simply importing more from the US is unlikely to resolve the deeper trade friction between the two countries.

LIMITS TO DIVERSIFICATION

Should the Thai government, then, consider export diversification alongside its effort to increase imports from the US? Given the size and depth of the US market, it remains unclear how much Thailand can, or should, diversify away from it.

Diversification involves more than just finding new buyers outside the US; it requires a broader reconfiguration of global supply chains to reduce dependency and enhance resilience. This is particularly relevant for Thai exporters engaged in original equipment manufacturing (OEM), such as those producing photosensitive devices and image sensors.

These firms often operate under contract for large multinational brands, supplying highly specialised components within tightly integrated global value chains. These manufacturers often tie producers closely to a few dominant lead firms. This limits the flexibility of Thai exporters to pivot toward new markets.

Expanding free trade agreements (FTAs) has been one approach. Thailand currently has 15 FTAs in place with partners. Multilateral frameworks like ASEAN and the Regional Comprehensive Economic Partnership further boost export potential by widening market access and enhancing regional integration. New agreements with blocs like the Pacific Alliance and the Southern Common Market (also known as MERCOSUR) also hold promise.

However, signing more FTAs comes with its own set of challenges. For businesses, complying with rules of origin requirements can be costly and complex, potentially limiting the practical benefits of expanded trade deals.

While expanding FTAs offers significant opportunities for market access and economic growth, addressing the complexities of compliance and ensuring that businesses can fully capitalise on these agreements will be crucial to their success.

The Thai government must go beyond a short-term plan and mobilise resources to address non-tariff barriers, reconfigure supply chains, and enhance the competitiveness of the private sector. This includes targeted fiscal policies, research and development investment, and regulatory reform.

Without a cohesive strategy, Thailand risks losing its competitive edge in global value chains and facing long-term disruption.

Wannaphong Durongkaveroj is Visiting Fellow at ISEAS – Yusof Ishak Institute and Associate Professor in the Faculty of Economics, Ramkhamhaeng University, Thailand. This commentary on ISEAS – Yusof Ishak Institute’s blog, Fulcrum.