Trump’s 36% tariffs pose a significant threat to Thai exports, while Thailand’s tariff cut offer to avoid them may lead to a surge in U.S. imports—raising concerns over a “Twin Influx” of goods from both the U.S. and China.
Key event:
U.S. sets 36% tariff on Thailand—one of the highest. Thai tariff cut offers remain cautious despite hope for deal before August 1 deadline.
On July 7, 2025, U.S. President Donald Trump issued formal letters to Thailand and 13 other countries, notifying them of upcoming reciprocal tariffs set to take effect on August 1—unless new trade agreements are reached. Thailand faces a potential 36% tariff, one of the highest among U.S. trading partners (see chart), and notably higher than regional competitors such as Vietnam, which secured a reduced rate of 20% (and 40% for suspected transshipped goods) through an earlier deal. These letters were intended to pressure targeted countries into accelerating trade talks and addressing trade imbalances, including reducing both tariff and non-tariff barriers.
Thailand had earlier submitted a proposal offering to eliminate tariffs on a broad range of U.S. goods—including liquefied natural gas, aircraft, corn, and industrial machinery—as part of a plan to reduce its USD 46 bn trade surplus with the U.S. However, no significant progress has been made since the discussions.
If Thailand’s approach mirrors Vietnam’s strategy of avoiding high reciprocal tariffs by offering the U.S. 0% tariffs on all imports, it could spark a serious domestic debate over the potential negative impact on the Thai economy, particularly in sensitive sectors. Although a U.S. court initially ruled against enforcing the “Liberation Day” tariffs, the decision is currently stayed pending appeal, keeping the tariffs in effect and maintaining strong pressure to reach a resolution before the August 1 deadline.
Krungsri Research view:
In the case of 36% tariffs, Thailand could face export losses of THB 162 bn, led by declines in exports of Textiles, Electronics, Food and Beverages, and Rubber and Plastics.
Krungsri Research assessed that the recent U.S. announcement to impose a 36% reciprocal tariff on Thai goods could result in long-term export losses of THB 162.1 bn, despite some potential trade diversion to other markets.
The most vulnerable sectors are those with certain degree of reliance on the U.S. market, especially Textiles, Leather and Footwear (-7.5% from baseline), Electronics and Electrical equipment (-6.1%), Other Manufactured goods (e.g., wood, paper, printing, and furniture) (-4.8%), Food and Beverages (-3.2%), and Rubber and Plastics (-2.1%), which together account for a combined 13.6% of Thailand’s GDP (in 2023).
Thailand’s 0% tariff offer on all U.S. goods—in exchange for lower U.S. tariffs —could limit export losses to THB 17 bn but trigger a THB 188 bn surge in U.S. imports, led by agriculture.
If Thailand and the U.S. reach a trade deal similar to the U.S.-Vietnam agreement, with the U.S. imposing 20% tariff on Thai goods and Thailand imposing zero tariff on U.S. goods, the impact on Thai exports could be less severe by 9.3 times than under the case of a 36% reciprocal tariff, or equal to export losses of THB 17.4 bn.
However, offering zero tariffs to the U.S. may reduce one problem while creating another, particularly the risk of a surge in Thailand’s imports from the U.S. Our model suggests that in the long run, Thailand’s imports from the U.S. could surge by 27%, or THB 188.3 bn.
Sensitive sectors, especially Agriculture and Food and Beverages, could see an influx of U.S. goods at a rate of over 100%. Other sectors could also experience a double-digit increase in imports from the U.S., including Motor Vehicles and Transport Equipment, Textiles, Leather and Footwear, and Rubber and Plastics.
2025 Thai GDP growth could drop to 1.5% under U.S. 36% tariffs. Long-term concerns grow over Thailand’s 0% tariff offer on all U.S. goods.
In the scenario where the U.S. imposes a 20% tariff on Thai goods, Thailand’s GDP growth in 2025 is projected at 2.1%, with export growth slowing to 3.5%. This marks a sharp deceleration compared to the 14.9% year-on-year export growth recorded during the first five months of the year.
If the U.S. raises tariffs to 36%, Thailand’s GDP growth in 2025 is expected to slow further to 1.5%, with export growth dropping to just 1.6%.
In a scenario where Thailand offers a 0% tariff on all U.S. imports in exchange for a reduced U.S. tariff rate (assumed at 20%), the short-term impact on Thai exports and GDP is unlikely to be more severe than under a 36% tariff scenario. However, over the longer term, an influx of U.S. goods could significantly disrupt sensitive domestic sectors—particularly Agriculture and Food and Beverages—potentially undermining their competitiveness and weighing on Thailand’s long-term growth prospects.
Amid a fragile economic outlook, Thailand’s move to grant greater U.S. market access risks a “Twin Influx” of imports, threatening key domestic sectors and underscoring the need for diversification and reform.
Thailand is in a very fragile position, battling on multiple fronts. On one hand, the country continues to face domestic structural headwinds, political uncertainty, and a slower-than-expected recovery in tourism. On the other hand, the ongoing influx of Chinese goods, driven by persistent excess supply in China’s manufacturing sector, along with trade diversion and trade circumvention since the U.S.-China trade war 1.0, continues to weigh on Thailand’s economy.
To make matters worse, granting greater market access to U.S. goods in exchange for tariff reduction may not be worth the cost. Such a move could trigger what we call a “Twin Influx”, a surge in imports from the U.S. along with the ongoing influx of Chinese goods. This will eventually pose significant threats to domestic producers, particularly in sensitive sectors such as Agriculture, which employs nearly 28.6% of the labor force (in 2024).
With increasingly hostile trade policies from the U.S. and China, Thailand has fewer options to respond effectively. At the very least, we should accelerate market diversification and trade negotiations with other countries to regain a certain degree of economic autonomy. This, in turn, may allow Thailand to turn its focus more toward addressing structural problems, rather than constantly being forced into reactive policy decision-making by other countries’ agendas.