Trade war will test govt

Trade war will test govt
February 2nd, 2025

Canada, China, and Mexico responded yesterday with their tariff countermeasures to the US after the head of state of the United States, Donald Trump, announced that he is imposing tariffs on these countries. On the day of his inauguration, President Trump signed a fusillade of orders -- among them new tariffs, imposing a 25% levy on imports from Canada and Mexico, and a 10% tariff on Chinese goods. These are measures that contain provisions for counter-retaliation, meaning that the US will increase the tariffs that it has imposed if the countries respond with the same measures. These latest actions signal the beginning of a new global trade war based on protectionist measures. The effects will be felt by consumers and trading nations including Thailand. Given that Thailand is currently the 12th largest exporter to the US, it must watch these developments closely. The Thai economy is still prone to external risks. Being the biggest export market for Thailand and accounting for 18% of total exports which were worth $55 billion in 2024, any interference with trade will be devastating. The US decision to impose tariffs on China is an opportunity and a threat for Thailand. On the negative side, the Chinese manufacturers are expected to channel their surplus production to the Asean market, and particularly Thailand. Increased Chinese imports may lead to market share expansion, price depression and increased market rivalry that will add to the existing problems of our vulnerable local producers. As the US goes further to investigate Chinese firms that shift their production to avoid tariffs, Thailand may be subjected to more trade restrictions if the American authorities consider Thailand as a transit hub. On the other hand, Thailand has a lot to gain from the changing global supply chains from China. The issue is whether Thailand is ready for the challenge. During Mr. Trump's first term, it was estimated that firms shifted about $300 billion of manufacturing from China but Thailand got only about 10 percent of that. However, when comparing themselves to their competitors in Vietnam and Indonesia, Thailand has several disadvantages. Only low labour costs, a lack of skilled labour, and demographic challenges make Thailand less competitive than it could be. In the short term, the government is concerned with the economy, for instance, the 10,000 baht digital wallet giveaway, the attempts to legalize casinos and online gambling, but it has failed to address real problems such as PM2.5 air pollution, the quality of air, and call centre fraud. Of greater concern is the lack of a clear strategic vision or structural changes that would help Thailand regain its position in the international competition. Companies have urged the setting up of a 'war room' to come up with proper plans and actions. There is no doubt that the government and the private sector must work together to address the challenges that are likely to be faced in the external environment. Innovative and legal frameworks are also vital to strengthen the country's structure to be resistant in the long run. The measures that the government is going to employ in order to reduce the impact of the US tariffs on Thai exports are still not well defined and seem to be rather lazy. Now that Washington has acted and a tariff war has broken out, it is about time the government gave an unmistakable impression of what it intends to do. We can only hope that the government comes up with a strong and well-thought out countermeasure. If we get anything less than that, Thailand will be in a lot of trouble.

Shandor Brenner

Shandor Brenner is an American journalist recognized for his sharp and insightful reporting on social and political issues. His work is known for its depth, integrity, and the ability to highlight critical societal concerns.

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