Thailand announces tariffs strategy

[reader]

 

Thailand, which imposes a 72% tariff rate on goods imported from the US, today announced its strategy in response to Trump's imposition of a 36% rate on Thailand: cut tariffs on US goods and purchase more US imports.

This begs the question: why didn't both parties choose to negotiate this well before instead of waiting for push to come to shove?

Extracted from Pattaya News

In response, Commerce Ministry Permanent Secretary Wutthikrai Leeveeraphan held an early morning press conference, outlining Thailand’s strategy to mitigate the impact. The government is preparing aggressive trade negotiations and considering measures such as reducing import taxes on U.S. goods and increasing purchases from the U.S. to balance trade.

https://thepattayanews.com/2025/04/03/u-s-president-imposes-10-percent-base-tariff-thailand-hit-with-36-percent-rate-in-trade-crackdown/

 

 

 

 

 

 

 

[bkkmfj2648]

2 hours ago, reader said:

This begs the question: why didn't both parties choose to negotiate this well before instead of waiting for push to come to shove?

And furthermore, what I don't understand is the following:

Trump states that he will eliminate the IRS and replace it with the ERS - which will collect all of these tariffs for the USA Treasury.

But, if every country follows the path of Thailand and Vietnam to reset their tariffs on incoming USA goods to ZERO --> then the ERS gets nothing.

Please explain how this strategy will work if every country on planet earth will reset their tariffs on incoming USA goods and services to zero.

What happens then?

[vinapu]

1 hour ago, bkkmfj2648 said:

 

Please explain how this strategy will work if every country on planet earth will reset their tariffs on incoming USA goods and services to zero.

What happens then?

start with the obvious - it will never happen. Some countries will try to accommodate USA demands while other will find other channels to purchase what they need or even may start at looking for way of producing it themselves.

[omega]

3 hours ago, bkkmfj2648 said:

And furthermore, what I don't understand is the following:

Trump states that he will eliminate the IRS and replace it with the ERS - which will collect all of these tariffs for the USA Treasury.

But, if every country follows the path of Thailand and Vietnam to reset their tariffs on incoming USA goods to ZERO --> then the ERS gets nothing.

Please explain how this strategy will work if every country on planet earth will reset their tariffs on incoming USA goods and services to zero.

What happens then?

That's not how tariffs work.

Tariffs placed by the USA on incoming goods are paid the by the person or company in the USA who is importing the goods. That additional cost will be added to the total price of the goods. The people buying the goods... US Consumers... ultimately pay the tariff. Americans will pay more for imported goods.

Thailand reducing their Tariffs on US goods means that it becomes cheaper for Thai importers to import US goods. Thai consumers will pay now less for things imported from USA.

Trump is trying to use the tariffs to effectively make "Made in the USA" products cheaper, driving up demand for them, and encouarging more manufacturing in the USA.

He may or may not be successful.

But it is going to be a painful process to transition to this new global order for trade. The "old" global supply chains meant that components for cars, airplanes, electronics and other advanced manufactured goods, would be sourced from all over the world. Those components are now subject to tariffs... making even products "made in the USA" more expensive, until supply chains can be adjusted to minimise costs in Trumps new world.

Americans are not the only ones hit of course. These tariffs, and the increased prices American consumers will need to pay, means demand will drop, and other countries will take economic hits.

[bkkmfj2648]

12 minutes ago, omega said:

That's not how tariffs work.

I think that my point was missed.

So, Thailand reduces its tariffs to zero on incoming goods and services from the USA.

Trump reciprocates and lowers the tariff for goods coming into the USA from Thailand to zero.

What will be the impact of this NONE tariff new world ?

[omega]

8 minutes ago, bkkmfj2648 said:

I think that my point was missed.

So, Thailand reduces its tariffs to zero on incoming goods and services from the USA.

Trump reciprocates and lowers the tariff for goods coming into the USA from Thailand to zero.

What will be the impact of this NONE tariff new world ?

He won't go no tariff.

Even with countries like the UK, with whom the US has a broadly neutral trade balance, are subject to 10% tariffs.

[PeterRS]

With many countries like China, Japan and even Germany having diversified their manufacturing to a number of different countries using part of end products actually made in more than a few, how does the USA plan to implement the detail of tariffs? Are Nike shoes made in Vietnam, China and other countries treated as American products or products from Asian countries?  

How will tariffs affect the price of cars in the USA where Mercedes, for example, have several factories? Will a Mercedes made in Thailand become more expensive than one made in the USA?

How about the Boeing 787? It has 28 key parts made outside the USA. Will these parts be subject to tariffs?

[bkkmfj2648]

2 minutes ago, PeterRS said:

How about the Boeing 787? It has 28 key parts made outside the USA. Will these parts be subject to tariffs?

It's mind boggling.

I've read that his goal is to get the USA back to its pre-1913 = pre Federal Reserve Bank days, when the then federal government was funded by tariffs instead of today's model of being funded by the USA global citizenry via the IRS and global tax collection.

[Travelingguy]

14 hours ago, reader said:

Thailand, which imposes a 72% tariff rate on goods imported from the US, today announced its strategy in response to Trump's imposition of a 36% rate on Thailand: cut tariffs on US goods and purchase more US imports.

Thailand does not impose a 72% tariff rate on all goods imported from the US.  I believe the actual number is in the single digits.  I believe that Trump used trade imbalance as the proxy for determining what tariff to impose.  A 72% trade imbalance makes perfect sense.  The average Thai cannot afford to buy most of the products that the US exports. This is why the tariff rates that Trump came up with are disproportionately high with regard to low income countries. 

[PeterRS]

5 minutes ago, bkkmfj2648 said:

It's mind boggling.

I've read that his goal is to get the USA back to its pre-1913 = pre Federal Reserve Bank days, when the then federal government was funded by tariffs instead of today's model of being funded by the USA global citizenry via the IRS and global tax collection.

Trump seems to forget that this is 2025 - not 1913. Interconnected supply chains are everywhere now. They were not then. Besides, in 1913 the USA had just become the world's strongest economic power. It remains in that position, but add China, Japan, Germany and India as one block and you have an even greater economic power. Granted, these four countries all have their own economic problems at present.  But together they are in a position to create a trade war that will likely end with either US consumers paying a lot more for many products which ultimately will hurt his electoral base - or Trump will once again be shown as the emperor with no clothes when he has to withdraw or significantly reduce his new tariffs.

He also seems not to remember that the Chinese think in the long term - not in four year electoral cycles. 

[PeterRS]

Trump's 44% tariff on Myanmar is absolutely outrageous! I could say the same about the tariffs on Vietnam, Cambodia and Laos, but at least they have not been fighting a multi-decades long civil war with a junta that cares nothing about the lives of ordinary people. Nor have their countries suffered the most devastating earthquake in years which Trump's policy has resulted in aid from the USA being held back. Shame on him!

[reader]

7 hours ago, Travelingguy said:

Thailand does not impose a 72% tariff rate on all goods imported from the US.  I believe the actual number is in the single digits.  I believe that Trump used trade imbalance as the proxy for determining what tariff to impose.  A 72% trade imbalance makes perfect sense.  The average Thai cannot afford to buy most of the products that the US exports. This is why the tariff rates that Trump came up with are disproportionately high with regard to low income countries. 

What are the actual numbers and goods that Thailand applies to US imports?

[reader]

Schedule of Thailand tariffs on US imports:

https://th.usembassy.gov/wp-content/uploads/sites/90/Import-Tariff-Table_Thailand-Update-June-2024.pdf

 

[macaroni21]

The issue is much bgger than tariffs, and no amount of tinkering with tariff rates will begin to address the real problem. 

Essentially what has happened is that the US has flipped ideologically, and wants to be:

(a) an isolationist power that nevertheless wants to remain the leading military power in the world, yet without getting entangled with alliances ("fortress America");
(b) a self-sufficient economy - because it sees a self-sufficient economy as critical to maintaining its strength and freedom of action.

The two aims are not achievable in combination, but the US does not realise that yet.

But I shall stick to the economic side in this discussion, which will mostly be about trade flows, reserve currencies and exchange rates.

 

It is not normal for the US Dollar and Western currencies to be so strong

We take it for granted that developing countries' currencies should be weak vis-a-vis the USD and western countries' currencies, such that Americans and Europeans end up with huge purchasing power relative to Thais, Brazilians or Vietnamese. It's an abnormal state of affairs that came out of an abnormal period in human history. The West industrialised between 1850 and 1950, while (partly through colonialism) other parts of the world remained agrarian, with a few places becoming mainly diggers of minerals.

The West didn't have much need or use for the agricultural or even many of the mineral products from the non-West. Or if it did, then through the power assymetry of colonial empires, it kept the output of the non-West cheap relative to the metropolitan countries like Britain and France. Even during the post-colonial 1950s to 2000, the non-West had healthy demand for products of the West - industrial goods, consumer goods, cultural goods (movies, music) status goods (wines and Porches) and also services from the West (banking, higher education, aviation) - whereas the non-West produced little that was of interest to the West (rice, anyone? coconut, anyone?). This imbalance of desire led to high demand for Western currencies (with which to buy western goods) and low demand for non-Western currencies among westerners. Westerners had no need to hold bahts, pesos, dinars, when they had little of interest to buy things from baht-cuntry, peso-country or dinar-country. As a result Western currencies became high-valued relative to non-West currencies.

At the same time, since so much of trade was directed towards to the West (rather than a non-West country trading with another non-West country), holding on to a buffer of Western currency was useful, not only to facilitate the buying of Western goods, but also as a mutually acceptable medium of exchange between 2 non-West countries. The West's aversion to holding rupiahs, rupees, reals, rials and ringgits also meant that even when the West bought stuff from a non-West country, the trade was almost always denominated in a Western currrency. Because of political stability and independent Central Banks in western currencies, there developed trust in the stability of the value of Western currencies. And thus, these trade-accrued buffers of western money held by non-West countries (sometimes indirectly through commercial companies) came to represent a store of value, i.e. reserve holdings.

Buffers are not in themselves bad. They lubricate trade, both with the country of the currency, but also with third countries.

Of course, the most desired reserve currency (which used to be gold and the Pound Sterling) came to be the US Dollar in the 2nd half of the 20th century. Just about every country in the world holds a buffer reserve of USD.

 

Oh shites, the agrarian countries industrialised

The present crisis owes its origins to decades back when several agrarian countries industrialised. Japan led the way, even before 1950, but post-WW2, we can add South Korea, Taiwan, many Latin American countries and many Asean countries as well. India too, though India seems disinclined to participate in the global trading system as much as the others. And of course, there's China. Not only did they begin to produce industrial and consumer goods, many of these countries produced them at far better price-value points than factories in the West.

Trade patterns changed. Today the West has a huge appetite for the industrial and consumer products of the non-West. Over decades, the US began to import huge volumes from countries like China, Indonesia, Korea, Mexico, while these countries (as they developed their own domestic industries) had less and less demand for US and Western goods (in general). In certain sectors, US goods still had the competitive or technological edge, but in sector after sector, the US has lost it. 

These non-West countries were soon selling far more to the US than they were buying from it ---> the trade deficit.

Yet, because of the trust in the USD, these non-West exporters were happy to receive payment in USD. But because of the chronic trade deficits year after year, the amounts of USD held by the non-West grew and grew. And for a long while, the US government was happy with that, because they could run a budget deficit and simply borrow China's dollar holdings, Japan's dollar holdings, Singapore's dollar holdings, to finance their budget deficit. 

 

Breaking point

You guessed it. We're now at breaking point. Borrowings cannot grow indefinitely. Interest paid out to China, Japan, etc keep growing. Somebody somewhere sees the de-industrialisation of the US as a serious threat to its future as a world power. So we see this ideological change: WE MUST RE-INDUSTRIALISE!

Trump's tariffs are meant to serve this purpose: to shut down imports into the US. To close the US market off from foreign producers/exporters so as to motivate re-industrialisation. I therefore do not think any tinkering with Vietnam's or Thailand's or Brazil's tariff regimes wil truly mollify the US now. 

 

But it won't work, at least not without other consequences

Economists are nearly unaminous that the goal of re-industrialisation will not work the way Trump and MAGA imagine. I can think of three big reasons:

1. So long as Trump's and succeeding administrations flip and flop policy-wise (the most likely scenario), no investor will be confident enough to invest/build factories to the scale required for the US to get anywhere near self-sufficiency.

2. In many industries, the US does not have the knowhow to manufacture to the same quality at the same efficiency as producers in other countries, notably Japan, China, Taiwan and Korea. Or Germany for machine tools. In specific sectors, Brazil and Mexico too. Think EV cars, solar panels, robotics, any number of products you find on Walmart or Target stories. Now think about AI in which China just pulled an upset. 

3. Even if American factories manage to produce these goods which the US hitherto has imported, they will be produced at a cost that is uncompetitive on the world stage (US wages being one of the reasons... more on this later). So, the US-factories will not be able to sell abroad, thus, not reap economics of scale that spring from serving a larger global market

In short, either the aim of US self-sufficiency will not be attained, or it will be attained in a way with a closed market like India's: domestic manufactures for the domestic market, with American consumers paying much higher prices for their US-made equivalents than what people in the rest of the world pay for the best Chinese, Japanese, Spanish, Czech, Chilean, Turkish, Brazilian, German, Canadian products.

 

What are the other consequences?

If the US becomes more like a closed market with imports strongly inhibited, then countries like China, Germany and Japan that have hitherto accummulated huge USD surpluses held in the US as reserves, will soon stop growing their reserves (since their trade surpluses will vanish). They may even wind them down because the unpredictability of US policy (e.g. after seizing Russian reserves) makes it risky to hold so many US dollars. There is also a real prospect of serious depreciation of the USD.

Consider this: the value of a currency vis-a-vis other currencies (i.e. the exchange rate) is a matter of supply and demand. If countries, because of their reduced trade with the US, no longer see the need to hold so much in buffer (since there is less trade to lubricate), if countries fear their reserves being seized, then they will want to offload whatever USD they have down to a safe amount. The offloading (a.k.a. selling pressure) will have an effect on the price of the USD (i.e. the exchange rate versus other currencies).

This then becomes a vicious cycle. Imports desired by Americans first have their prices raised because they now come with a 25% (insert percentage here) tax (also known as tariff) payable to the US government. Then as the USD falls in value versus other countries, imports become even more expensive to Americans. If the effect of expensive imports is to reduce trade into the US further, then countries like China, Japan, will want even less to keep holding US dollars. Which then cycles back to downward pressure on the USD.

What about financing the US government's deficit? Well, as China's, Japan's and other countries' USD reserves shrink, the US government will have fewer lenders to help it bridge the deficit. Meanwhile the tariffs are going to be such that imports will likely shrink, thus not raising as much revenue as hoped for (at the same time, more Americans will find themselves buying less since they cannot afford imported goods as much as before). Economists have pointed out that even in the best scenario, revenues raised through new tariffs will not be anywhere enough to close the budget deficit. 

If the US government cannot fund its deficit, it will necessarily have to slash expenditure. Military expenditure. Social spending. Infrastructure maintenance.

But won't there be a point when US-made products become competitive on the world market? Yes, in theory. But costs in the US will have to fall very far to get there. Labour cost has to match what factory workers earn sewing Nike shoes in Indonesia, packing corned beef in Brazil, assembling umbrellas in Vietnam and making knock-down furniture in China.

Let's use an example that we're familiar with: paid sex. Today, the US has a trade deficit in paid sex. More Americans buy sex from the non-West than non-westerners buy from America (they can't afford it!). In order for a trade balance to be restored, the rentboy in the US has to cost roughly the same as the rentboy in Asia or Latin America since the rentboy in the US probably does not offer any qualitatively better service. I think currently, the price differential is $250 vs $60? i.e. roughly 4 to 1. Probably more. So, to restore trade balance, the USD has to fall to a quarter of its current value before US products/services become as attractive as non-west products/services. In other words, trade balance in paid sex will be restored when the USD is worth 8.50 baht, or 1.40 Brazilian Reals.

At that point, we will buy Nike shoes sewn in Massachusetts, hang up Christmas lights made in Arkansas, and fly over to North Carolina for two weeks of debauchery. Mind you, we might stll be flying over in a Chinese-made airliner, watching made-in-Japan holographic movies en-route on our foldable phone made in Syria by a Vietnamese tech company.

[NIrishGuy]

Great post there Macaroni21, I was about to say did you copy and paste that from somewhere - until I reached the last paragraph re the rent boys ( which explained the situation in the best way possible for me at least 🙂.  The only point I'd add there is even if the American rent boy model drops their costs to a quarter of their current costs i STILL will be opting for the Asian model as we know it just operates SO much better and gives much better short and long term (time) service !