Thai-US trade talks are likely to fail

ECONOMY TALK

- Chartchai Parasuk

Don’t get too excited over news the temporary trade deal between China and the US will mean friendly negotiations with other countries. The US government still aims for higher import tax income to narrow its monstrous fiscal deficit. As explained in a previous article, Donald Trump would love to see an average tariff rate of around 20% or higher on imports. Higher customs revenue already allowed the US to achieve a budget surplus of US$258 billion (8.5 trillion baht) in April. The figure incorporates only a 10% universal tariff, as full reciprocal tariffs were postponed for 90 days from April 8. Just imagine how nice the US budget position would be with 20% or more import tariff revenue?

Thailand's reciprocal tariff rate is 36%, half the calculated rate of 72%, and the country is waiting to negotiate the rate down. Unfortunately, Thailand is not on the priority list of 20 economies scheduled to have discussions with the US negotiation teams. Many Asean economies such as Vietnam, Indonesia, Malaysia, and Cambodia are said to be on the list.

Thailand’s trade surplus with the US is $45.6 billion, which is far higher than Malaysia’s $24.8 billion surplus and Indonesia's $17.9 billion. Yet we are not even on the list. What is wrong with Thailand?

This is my observation and I could be wrong. The reason why Thailand is not on the priority tariff discussion list, or might not even be on later lists, is because Thailand has not offered to resolve the export “fronting” situation for Chinese-made products. The problem for Thailand is that it allows Chinese manufacturers to re-label their products as “Made in Thailand” to avoid higher US import tax. The evidence is in the attached table.