Economic experts warn of Trump’s tariffs and Thailand's political instability: Urge reduced dependence on China and the US

At a seminar titled “How Will Thailand Survive Trump’s Tariffs?”, organised by the Economic Society of Thailand (EST), discussions focused on the impact of Trump’s tariffs on Thailand’s economy. Economists, scholars, and business leaders raised concerns that while Thailand has secured a 19% reciprocal tariff, this is just the beginning, and the uncertainty surrounding Trump’s policies could bring further waves of economic challenges, much like a tsunami.

Kobsak Pootrakool, President of the EST, highlighted two key challenges facing the Thai economy:

1. The ongoing impact of Trump’s tariffs, even with the 19% rate, as the volatility of US trade policies could cause significant global economic fluctuations. Trump’s unpredictable approach poses a serious challenge.

2. The increase in US tariff revenues, which reached $30 billion last month, is expected to rise to 400-500 billion baht annually. This would help reduce the US fiscal deficit and trade deficit.

Kobsak emphasised that the 19% tariff is not the final figure, with more to come, particularly regarding non-tariff barriers and the Transshipment issue, which remains a major risk for Thailand.

Another crucial concern discussed was the US-China trade war, which could escalate into a technology war, digital war, or financial war, adding further global uncertainty. This, combined with Thailand’s internal political instability, makes managing the economy even more challenging.

Kobsak also stated that Thailand’s political instability is a significant domestic challenge that is seriously affecting the country's ability to manage its economy, especially during external crises. The uncertainty surrounding political issues has made economic progress even more difficult.

Experts assessed that these challenges could be alleviated within 1-2 months, particularly once the courts resolve the ongoing political cases. However, if political uncertainties persist, this could hinder economic momentum and complicate the budget planning for 2026, as well as efforts to stimulate economic growth.

Thailand needs an economic reformation

Associate Professor Nipon Puapongsakorn, former President of the EST, stated that Thailand is facing not only the challenges of Trump’s policies but also non-tariff barriers that are impacting global trade, including Thailand. He suggested that Thailand should take this opportunity to reform its economic structure to enhance its competitive capabilities.

Nipon pointed out several non-tariff barriers affecting trade, such as the risks posed by import quantity restrictions, quotas, and the limitations on the amount of goods that can be imported into the country. He also highlighted issues like excise taxes, lack of transparency, and the discretionary power of customs officers, all of which are concerns raised by the US but have yet to be addressed.

Another issue raised was the violation of patents that the US has pointed out, specifically in relation to public procurement processes and obstacles in services sectors. For example, US financial services firms have expressed interest in entering the Thai market but are unable to do so due to these barriers. This shows that Thailand still faces significant obstacles in these areas.

Nipon stressed that Thailand should use this moment to undergo a structural transformation and create a new future for the country—“New Thailand”—without over-relying on China or the US. Thailand should find its own strategic position in the global market.

Additionally, the agricultural sector must undergo a complete transformation. Thailand cannot achieve long-term wealth through agriculture alone. The key steps forward are creating jobs in local communities and developing the workforce, using tools similar to those employed by Singapore, such as community-level reskilling programs.

“The government is currently in a very weak position. The hope for the country lies with the private sector, civil society, and academia. While there are still talented people within the public sector, the government tends to favour those who cater to political interests. Therefore, I propose creating a new mechanism that is not tied to the state, allowing other sectors to collaborate in determining the economic direction, so that Thailand can move forward, even during a period when the state remains weak,” Nipon concluded.

Reduce focus on short-term relief

Pisan Manawapat, former Thai Ambassador to the United States, stated that Trump's tariffs are unpredictable and can change at any time. Therefore, the key to overcoming this uncertainty lies in building resilience across various sectors by analysing, promoting, and exporting Thai products that remain competitive in the US market.

Furthermore, instead of allocating budgets towards short-term relief, the focus should shift to structural economic reforms that align with future directions and the search for new markets with high potential, such as India, the Middle East, and Africa. Special attention should be given to supporting SMEs with limited resources or access to capital, as well as reducing dependency on China, which could impact Thai SMEs and may not support the country’s future economic structure.

In addition, Thailand should expedite negotiations for Free Trade Agreements (FTAs) with key markets, maximise the benefits of existing FTAs, and encourage entrepreneurs to fully leverage these agreements. Consideration should also be given to joining comprehensive and progressive agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Concern over impact on small-scale pig farmers

Prasit Boondoungprasert, Chairman of the Board at Charoen Pokphand Foods Public Company Limited (CPF), expressed concerns about the trade agreement between Thailand and the US, which involves increased imports of agricultural products from the US, such as animal feed corn, soybean meal, and corn by-products. This deal is expected to reduce the cost of animal feed ingredients significantly.

The reduction in raw material costs will lower the production cost for animal feed and the livestock industry in Thailand, with the price difference for corn estimated to be 1-2 baht per kilogram, including shipping costs. However, when considering the expected import volume of up to 3 million tonnes of corn and the total value of soybean meal imports at 48 billion baht, this move will bring substantial economic benefits.

“The reduced raw material costs will enhance the competitiveness of Thailand’s meat industry, particularly for processed chicken, where Thailand ranks as the third-largest global exporter, with quality standards on par with those of Europe,” Prasit added.

However, the aspect of the trade deal concerning pork imports raises concerns. While details remain unclear, it is expected that imports will amount to around 1% of total pork consumption, or 10,000 tonnes. Thailand's policy prohibits the use of lean meat enhancers. Allowing pork imports from the US, where such substances may be used, would make enforcement difficult and could compromise consumer safety.

Prasit also expressed concerns about undermining the 30 years of efforts to control such practices and warned that allowing systematic pork imports could increase the risk of illegal pork smuggling.

“The Thai pork industry is worth 150 billion baht, and importing pork from abroad could severely impact small-scale farmers and the stability of the industry. Even CPF raises 95% of its pigs through contracted farmers, and controlling standards will become more challenging if lean meat enhancers are introduced,” he concluded.