Richard Yarrow

Research Fellow, Mossavar-Rahmani Center, Harvard University

Former Visiting Fellow, Thammasat University

Much of Asia is nervously watching the start of Donald Trump’s second term as president of the United States. In Southeast Asia, the concerns are primarily economic: How far will Trump’s campaign threats of trade sanctions and tariffs reach? What will Trump trade wars mean for ASEAN’s growing, but fragile economies?

 

Thailand is not immune to these concerns. In the past year, around 20% of Thailand’s exports went to the United States. After China, Japan, South Korea, and Vietnam, Thailand maintains one of Asia’s largest trade surpluses with the United States. Trump’s frustrations with bilateral trade imbalances mean that his administration could target Thailand’s exports. The conservative Heritage Foundation’s Project 2025 report listed Thailand among just six trading partners that a Trump-led government should target to reduce trade deficits.[1]

 

Some of Trump’s advisors have also urged a greater linking of geopolitical and economic goals. Thailand has long benefited from close ties with the U.S. military, including through training and sales of weapons and equipment. As Trump’s appointees concentrate on trade surpluses, and remain concerned over deepening Thai-Chinese military ties, it is not impossible that the new administration could order reduced engagement with the Thai military as an extension of Trump’s trade policy.

 

In recent months, Thailand has not risen high among Trump’s overseas priorities. On trade, Trump and his advisors have focused on China, Vietnam, Malaysia, Canada, and Mexico—though the list could broaden as Trump settles into office. In his first term, Trump visited Singapore, the Philippines, and Vietnam but never visited Thailand, and a senior Thai leader only visited Washington, DC once.[2] This may mean that it is more likely that Thailand will be irrelevant in Washington, or face similar tariffs as a broad range of other countries, rather than become a specific target. While irrelevance may temporarily reassure Thai exporters and soldiers, it is a poor longer-term strategy. A Thailand that is not noticed by the United States is also a Thailand that attracts little investment or geopolitical support when or where Thailand needs it. In a country suffering from prolonged disappointing economic growth, with little technological innovation, festering water disputes, and a civil war on one of its borders, being unnoticed overseas may not be a good outcome.

 

One Foreign Ministry response to Washington’s trade complaints is that Thai companies will invest more in the United States. This may be a risky argument for Thailand to make. Many Democrats and Republicans in Washington see investments from abroad as the mathematically necessary corollary to steep trade imbalances,[3] which is partly why some politicians from both U.S. parties have proposed measures to reduce investment inflows.[4] Therefore, pledges by Thailand to increase investments could sound like a pledge to increase Thailand’s trade surplus rather than decrease it. For Thailand, a country that badly under-invests in its own infrastructure and education, to place more Thai money into U.S. asset markets, which are so flush with resources that they allocate trillions of dollars to cryptocurrencies, also poorly aligns with Thailand’s own development needs.

 

Another sometimes-discussed strategy has been to slow Chinese development projects within Thailand, as a way of balancing the Thai government’s commitments to the U.S. and China. This may be sensible for financial stability, as it is unlikely that a Thai-financed high-speed railway in Isaan to Laos could repay its costs. However, slowing all Chinese infrastructure projects in Thailand probably would not enhance relations with the United States, since this does not help the U.S. itself. Unlike technological infrastructure—which in Thailand, is already heavily dominated by Chinese providers—roads, rails, and ports remain under Thai sovereignty and broad operational control no matter who builds them. If China can help finance more commercially-useful transport infrastructure in Thailand, then the Thai economy would likely benefit without much cost to relations with the West.

Initial Steps for a Better Economic Strategy

What can Thai authorities do better to prepare the country economically for the Trump administration? Three initial steps, in order of their difficulty or complexity, might be: addressing goods trade and manufacturing issues with Chinese firms; increasing targeted imports from the United States; and opening and de-regulation toward U.S. industries in Southeast Asia. Some of these suggestions may be undesirable or politically unpalatable to many Thai citizens or politicians. However, each of these steps could benefit the long-term health of the Thai economy, in addition to giving Thailand a short or medium-term buffer in economic relations with the U.S.

 

First, Thailand’s national government should quickly move to track trade re-routing by Chinese manufacturers operating through (but not fully in) Thailand, and to enforce violations of existing Thai laws and regulations. There is quickly growing concern among Washington policymakers that Chinese goods are being re-routed through countries like Vietnam and Malaysia to avoid U.S. tariffs or trade restrictions. If Thailand acts quickly, it can avoid being grouped with other Southeast Asian countries on this issue and can avoid any similar repercussions.

 

Over the last five years, Thai imports from China and exports to the U.S. have risen astonishingly and mysteriously quickly. As Archanun Kohpaiboon and Prasert Vijithnopparat noted, China’s overall share of Thailand’s imports roughly doubled in only five years, with imports from China rising from around 130 billion baht a month in 2019 to 250 billion baht a month in late 2024.[5] Some of the change is visible in consumer goods, like electric vehicles, but for technological parts and industrial goods, the change is also stark. Since 2019, mainland Chinese exports to Thailand:

• in “computers, parts and accessories” rose by around 63%, to 15 billion baht a month.
• in “machinery for industrial uses and parts” rose by around 87%, to 21 billion baht a month.
• in “plastic products” rose by 90% to 8 billion baht a month.
• in “telecom equipment and accessories” rose by around 118%, to 11 billion baht a month.
• in “electrical and electronic equipment and parts,” including semiconductors, rose by around 186%, to over 16 billion baht a month.
• in “electrical machinery for telecommunications” rose by around 189% to 8 billion baht a month.[6]

These figures undercount goods imported from China, as imports from Hong Kong are measured separately. Thailand’s imports from Hong Kong have more than doubled compared with 2019 levels.

 

These changes have been matched by similarly sharp rises in Thailand’s exports to the United States, with exports rising from 81 billion baht a month in 2019 to around 170 billion baht by late 2024 (Thai exports to China rose more modestly, from 75 to 103 billion baht a month, in that time). Thai exports to the U.S. of data processing machines and parts more than doubled since 2019, to around 34 billion baht a month, while telephone exports to the U.S. rose by 14 times to around 14 billion baht a month. The export growth parallels sharp increases in similar types of imports from China.

 

These extraordinary figures would be understandable and expected if Thailand were newly industrializing or experiencing a manufacturing renaissance. This is hard to see. Instead, even as Thai trade is soaring, Thailand’s manufacturing employment has stagnated at around 6.3 million workers, Thailand’s manufacturing sector contribution to GDP has stagnated since 2021, private sector gross fixed capital formation has risen by less than 5% a year since 2021[7] (declining during most of 2024), the earnings outlook of firms on the SET has weakened, and an array of poor economic news has been reported about manufacturers across the country.[8] If Thailand is experiencing such a manufacturing boom with a sharp rise in Thai-made exports, then why is overall manufacturing employment and capital spending so weak?

 

A possible explanation for the conflicting data is that some Chinese industries are transferring goods, with little Thai content or value-added, through Thailand to Western countries. These transfers then contribute to Thailand’s bilateral trade surplus with the United States, but give limited broader benefits to the Thai economy or Thai workers. They also create the appearance of larger trade surpluses that increase the risk of trade conflicts with the U.S., and sanctions and pains for industries that genuinely conduct business within Thailand with Thai workers. It is difficult to tell exactly how much re-routing has contributed to Thailand’s soaring trade figures. Investigating these industrial practices, and enforcing stricter requirements on the use of local supply chains and workers, would help reduce Thailand’s risks from a trade war without significantly harming Thailand’s economy. It would also signal to the U.S. that Thailand is serious about mitigating trade imbalances and Chinese re-routing practices.

 

Second, Thai authorities should prepare to increase imports from the United States. This is what Trump and his advisors want more than foreign investment. As Thailand has a relatively smaller and weaker economy that cannot use or afford many higher-value U.S. products, it is not practical for Thailand to dramatically and quickly increase imports from the U.S. across the board in the way the White House might desire. However, it is economically practical for Thailand to increase certain targeted imports from the U.S., in ways that could satisfy U.S. negotiators as well as benefit Thailand.

 

The most controversial way is through lowering barriers to agricultural imports. This is a perennial source of tension with the U.S., and is a particular concern to Trump, who relies on rural voters. Raising agricultural imports from the U.S. would directly hurt incomes of Thai farmers through new competition. If agricultural trade grows on a slow, steady schedule, it could bring lower prices and higher purchasing power for Thai consumers, could help reduce field burning practices that have created deadly air pollution in much of the country, and could support an economic transition by encouraging more farmers to grow specialized crops or shift to urban jobs. No country has become wealthy while keeping a quarter to a third of its workforce dependent on agriculture, as has been the case in Thailand for the past two decades.[9]

 

Another targeted way to raise imports is by expanding Thailand’s public scholarship program, which contributes modestly to U.S. services exports. Governments in Singapore, Hong Kong, and mainland China have used scholarship programs at U.S. universities to astonishingly good effect in improving civil services and key industries.[10] But while Thailand has an obviously greater need for overseas-trained civil servants than Singapore does, Thailand’s overseas scholarship programs appear to be declining. Between 2014 and 2024, the number of people receiving civil service support to study in the U.S., including for short non-degree programs, declined by 43%. Among civil service scholarships for undergraduate studies, where government support often has the greatest impact, the number has fallen by around a third, from around 50 Thai scholars per year in the U.S. in 2014-15, to around 30-35 per year now.[11] Thailand needs a trained workforce, yet the number of students supported to study in the U.S. has fallen sharply.

 

The government’s scholarships should be quintupled, allocated to students from different regions of Thailand to ensure greater socioeconomic access, and expanded to allow more working, older civil servants to take short overseas training or master’s courses. Such steps would bring Thailand closer to the number of scholarships funded by Singapore. The Hong Kong government once had regular training programs for civil servants in collaboration with U.S. universities like Harvard Kennedy School, an example which Thai agencies could learn from. Thailand could also follow the example of other Asian neighbors in encouraging more students to study overseas on their own and outside of official scholarship programs.

 

A final, more complicated step would be in opening or de-regulating access to Thai markets for higher-value U.S. businesses. Industries to promote might include insurance, finance, financial technology, education, and pharmaceuticals, areas where U.S. firms are prominent and where Thailand could benefit from greater competition and investment. Currently, Thailand gives banking licenses to firms from Japan and China, yet U.S. financial firms have a minimal presence. Action to include U.S. firms would improve conditions for Thai consumers, but would require more complicated regulatory, tax, and legal changes.

 

The Foreign Policy of an Economic Agenda

 

Thailand grew rapidly, in the 1970s-1990s, when it maintained close relations with the U.S. and Japan. Thai growth slowed in the 2000s and 2010s while relations with the West worsened. Is this a coincidence? There are many factors behind a country’s growth, yet a similar pattern may be detected for other Asian countries. As Deng Xiaoping reportedly said, “all of those countries that were with the United States have been rich, whereas all of those against the United States have remained poor.”[12] Is Thailand positioned with a foreign policy ready to enhance economic and political relations with the West?

 

Other countries in the region have recently deepened ties with the U.S. The Philippines reinforced diplomatic and military ties with both the U.S. and Japan, backed by a series of mutual state and cabinet visits. Australia supported the opening of a branch of the Canberra-based ASPI think tank in Washington, while Singapore supported a Lee Kuan Yew chair position at the Washington-based Brookings Institution.

 

Several Asian countries enhanced ties with the U.S. through personal visits. The most successful visits by Asian leaders have been by Shinzo Abe and Yoon Suk Yeol, who made repeated trips and gave bold and influential speeches at U.S. think tanks and universities. Vietnam’s Deputy Prime Minister Le Minh Khai and Singapore’s Prime Minister Lee Hsien Loong each spoke at Harvard in 2024, and a top official from Cambodia is expected to visit Harvard in spring 2025. Former World Bank economist and Indonesia’s Finance Minister Sri Mulyani Indrawati has been a frequent and acclaimed speaker at think tanks, universities, and business gatherings across the U.S. East Coast.

 

By contrast, Thailand has seemed largely absent. While Thailand invested in an elaborate new embassy facility in Beijing capable of hosting large events, Thailand maintains a quiet, aging embassy facility in Washington far from other diplomatic compounds. There have been no prominent or influential speeches by leading Thai politicians in the U.S. in many years. (The last prominent Thai official to visit Harvard was likely BOT Governor Veerathai Santiprabob back in 2015, who, though an eloquent speaker, was not a sitting politician representing the government.) How many Thai officials are ready to travel in the U.S. and conduct the kind of diplomacy that other (including smaller and poorer) Asian governments are doing? How well is Thailand encouraging knowledge about Thailand within the U.S.?

Asia faces great uncertainty for supply chains in both lower-value manufacturing industries and higher-value business services and technology industries. Thailand still has several natural advantages in attracting services and goods production. Thais have historically integrated or accommodated foreigners well. Bangkok features widespread English, good international airports, and lower costs for expats and freer conditions than can be found in much of Asia. In manufacturing, Thailand has good port facilities in the EEC and a legacy of producing computer equipment that technology companies could upgrade more easily than developing entirely new factories and supply chains in Vietnam or India.

However, there are also foreign policy preconditions to attracting higher value services and factories. Since Covid-19 and the war in Ukraine, American, Japanese, and European officials and businessmen have worried more about geopolitical threats to existing supply chains. Such officials and businessmen want to ensure that access to goods and services will remain secure and reliable even if there is a crisis. There is also growing concern over technological security, reflected in the Biden Administration’s tightening controls on trade in advanced chips, AI systems, and data center equipment. For now, the U.S. lists Thailand in a middle tier—with fewer restrictions on technology trade than mainland China, Laos, Vietnam, or Cambodia, but less access than closer U.S. partners like Japan, South Korea, and Taiwan.[13]

Can Thailand persuade Western governments that it is a reliable and predictable partner for the longer term? Doing so could help Thailand access more advanced technologies and attract investments for higher-value industries, but would require Bangkok to re-set foreign policy priorities. The fact that authorities recently wanted to host overseas Chinese police stations and suggested they would deport asylum seekers to Xinjiang may have brought some benefits in relations with China, but longer-term costs in relations with the West.

Meanwhile, Thailand has ranked near the bottom among ASEAN recipients of Chinese investments since 2010.[14] Therefore, it is not clear that Thailand has managed to steer its foreign policy to adequately help the economy with benefits from all sides. Singapore, by contrast, accepted the (relatively small) immediate costs of imposing sanctions on Russia in response to the war in Ukraine, and reaped the (far larger) long term benefits of maintaining good ties with Western banks and businesses, securing large investments from both China and the United States. For the first time in history, Singapore likely surpassed Thailand in 2024 as having the second-largest GDP within ASEAN.

Reflecting on these differences should suggest the economic opportunities that come with a new approach to foreign policy. Many different goals can be merged into a foreign policy agenda, and economics does not always need to be at the forefront of foreign policy. Yet economic growth can be stimulated depending on the geopolitical stances that leaders take, and Thailand might increasingly need such stimulus. As Trump enters office, Thailand could look for new economic opportunities alongside the heightened risks.

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[1] Mandate for Leadership, ed. Paul Dans and Steven Groves (Washington, DC: Heritage Foundation, 2023), https://static.project2025.org/2025_MandateForLeadership_FULL.pdf, pp. 772-773.

[2] Pongphisoot Busbarat, “Shopping diplomacy: The Thai prime minister’s visit to the United States and its implications for Thai-US relations,” ISEAS Perspective 2017, no. 78 (Oct. 20, 2017), https://www.iseas.edu.sg/wp-content/uploads/pdfs/ISEAS_Perspective_2017_78.pdf. See also the U.S. State Department visit records at  https://history.state.gov/departmenthistory/visits/thailand and https://history.state.gov/departmenthistory/travels/president/thailand.

[3] This is because a country’s current account must balance with its capital account. To raise foreign investments, one needs foreign currency, and one gains net foreign currency by exporting more than importing. For instance, see Michael Pettis, “Foreign saving gluts and American financial imbalances,” Carnegie Endowment, Dec. 1, 2020, https://carnegieendowment.org/china-financial-markets/2020/12/foreign-saving-gluts-and-american-financial-imbalances?lang=en.

[4] “U.S. Senators Tammy Baldwin and Josh Hawley lead bipartisan effort to restore competitiveness,” Office of U.S. Senator Tammy Baldwin, July 31, 2019, https://www.baldwin.senate.gov/news/press-releases/competitive-dollar-for-jobs-and-prosperity-act.

[5] Archanun Kohpaiboon and Prasert Vijithnopparat, “Thailand and the Chinese import surge,” Fulcrum, Dec. 13, 2024, https://fulcrum.sg/thailand-and-the-chinese-import-surge-possible-policy-responses/.

[6] Figures from the Ministry of Commerce. Percentages based on year-to-date imports up to November-December 2024.

[7] According to the NESDC’s chained volume measure data, private sector gross fixed capital formation growth has been under 5% a year since 2012.

[8] For instance, “Ceramic industry faces threat from Chinese knock-offs,” Bangkok Post, Aug. 13, 2024, https://www.bangkokpost.com/business/general/2846391/ceramic-industry-faces-threat-from-chinese-knock-offs.

[9] Richard Yarrow, Thailand’s Economic Dilemmas in Post-Pandemic Asia (Singapore: ISEAS, 2022), https://www.iseas.edu.sg/wp-content/uploads/2022/08/TRS14_22.pdf.

[10] Richard Yarrow, “Singapore targets talent for long-term growth,” East Asia Forum, May 28, 2024, https://eastasiaforum.org/2024/05/28/singapore-targets-talent-for-long-term-growth/.

[11] There were 207 civil service scholarship recipients studying for U.S. bachelor’s degrees in 2015, or about 52 students per year for four-year programs. In 2021, the number fell to 173 students, or about 43 per year. Data do not distinguish by degree program after 2021, but officials estimate that there are currently around 130-140 scholarship recipients in the U.S. studying for undergraduate degrees. The data were kindly provided by the Office of the Civil Service Commission, and include King’s Scholars and MFA and other ministry scholarships, but exclude military and BOT scholars.

[12] Chen Jian, “From Mao to Deng: China’s Changing Relations with the United States,” CWIHP Working Paper 92, Wilson Center (Nov. 2019), https://www.wilsoncenter.org/publication/mao-to-deng-chinas-changing-relations-the-united-states.

[13] “Ensuring U.S. security and economic strength in the age of artificial intelligence,” White House Briefing Room, Jan. 13, 2025, archived at https://web.archive.org/web/20250115010947/https://www.whitehouse.gov/briefing-room/statements-releases/2025/01/13/fact-sheet-ensuring-u-s-security-and-economic-strength-in-the-age-of-artificial-intelligence/; Emily Benson, “Updated October 7 semiconductor export controls,” CSIS, Oct. 18, 2023, https://www.csis.org/analysis/updated-october-7-semiconductor-export-controls.

[14] Evelyn Goh and Liu Nan, Chinese Investments in Southeast Asia (Singapore: ISEAS, 2023); ASEAN Investment Report 2024 (Jakarta: ASEAN Secretariat, 2024), https://asean.org/wp-content/uploads/2024/10/AIR2024-3.pdf, p. 30.