Trump’s tariff hits Thai businesses hard: Industrial zones and exports face major setback

Thailand faces a 36% tariff from the US starting August 1, impacting industries and exports. The move raises concerns about economic instability and foreign investment shifts.

Thailand’s businesses are bracing for the impact of the US’s 36% tariff, which will come into effect on August 1, 2025. This move is part of the US’s efforts to address the trade imbalance with Thailand and will apply to all products imported from Thailand.

In addition to political instability, Thailand’s economy has been slowing down, with escalating tensions at the Thai-Cambodian border. This development is compounded by the global situation, as US President Donald Trump posted an open letter on July 7 to Thailand's acting Prime Minister, Suriya Jungrungreangkit, addressing trade negotiations between the US and Thailand. Despite a significant trade deficit with Thailand, the US will continue its trade relationship, confirming that the 36% tariff will be imposed, starting August 1, 2025.

“The 36% number is far less than what is needed to eliminate the trade deficit disparity we have with your country,” the letter stated. This announcement has shaken Thailand’s export sector, which feels disadvantaged compared to trade competitors like Vietnam, where tariffs remain lower.

The high tariff rate is expected to impact Thailand's production and export costs, especially with competitors such as Vietnam having a lower tariff. There are growing concerns that foreign investors, particularly from China and Japan, may relocate their production bases to countries with lower tariffs, further weakening Thailand’s manufacturing sector. This poses a particular threat to industrial parks, where foreign investment, notably from China, has been significant, especially in the Eastern Economic Corridor (EEC).Pornarit Chounchaisit, President of the Thai Real Estate Association, expressed concern that the 36% tariff will severely affect the Thai export sector, which is a key driver of the economy. The higher costs compared to competitors like Vietnam will likely reduce Thailand’s competitiveness.

The situation also raises alarm about the future of foreign investment in Thailand, particularly from China. Many Chinese companies have been purchasing land in Thailand, especially in industrial zones within the EEC. With higher production costs in Thailand, these companies might consider relocating their manufacturing bases elsewhere.

“Thailand has been open to Chinese investment, especially those in grey businesses, as seen in the steel factories with substandard products and cheap goods being mislabelled as Thai exports to the US,” Pornarit said. “This, combined with the situation in Thailand, makes the 36% tariff a crucial factor that could significantly impact the country.”

(2025/07/08-00:00)