Thailand's export-led model needs rejig

Time is running out for Thailand, and the stakes have never been higher. As Finance Minister Pichai Chunhavajira arrived in Washington this week for critical trade talks with the US negotiation team, Thailand confronts not just a tariff negotiation but an existential challenge to its export-dependent economic model.

- Pavida Pananond

With US President Donald Trump's 90-day grace period expiring on July 8, Thailand must secure a deal or face a punishing 36% tariff that threatens to unravel decades of export-led development strategy.

The domestic political vacuum resulting from the Constitutional Court's suspension of Prime Minister Paetongtarn Shinawatra over a leaked phone conversation with former Cambodian leader Hun Sen complicates matters further. The court's decision has plunged the government into crisis precisely when political stability is most crucial. Finance Minister Pichai's negotiation team may now have to convince their US counterpart not only of their proposals' merits but of their own government's tenure and authority to implement any agreement reached.

The challenge is compounded by regional competitive dynamics that Thailand can no longer ignore. While Thailand scrambles to secure its first formal in-person meeting, Vietnam has already engaged in multiple rounds of talks with Washington. This late start means that Thailand must secure favourable terms while ensuring they remain competitive relative to what Vietnam and other Asean neighbours ultimately achieve.

While the US has indicated an 18% levy, Thailand aims to reduce the 36% “reciprocal tariff” to the universal minimum of 10%. The US has requested Thailand address tax measures, non-tariff barriers, digital trade, and economic security concerns to reduce its US$45.6 billion (1.48 trillion baht) bilateral trade deficit. Thailand’s earlier offer included greater market access and tighter screening of transshipments. While policymakers know a full-scale deal is unlikely before July 8, there is hope for an extension agreement.