Thai Businesses Face US Tariff Threat as Border Conflict Links to Trade Deadline

 

Thai businesses are bracing for a potential 36% tariff imposition on goods arriving at US ports from 1st August 2025.

 

This significant economic threat stems directly from the ongoing border dispute with Cambodia, which the United States has now explicitly made a condition in its reciprocal tariff negotiations with Bangkok.

 

The escalating tensions prompted Malaysian Prime Minister Anwar Ibrahim, acting as ASEAN Chair, to host urgent discussions in Kuala Lumpur on 28th July 2025.

 

Thailand’s Acting Prime Minister Phumtham Wechayachai and Cambodian Prime Minister Hun Manet met to seek a resolution to the cross-border clashes.

 

These high-level talks followed a direct warning from US President Donald Trump to both leaders.

 

President Trump reportedly conveyed that the US would not finalise trade agreements with either Thailand or Cambodia while their border conflict persisted.

 

Under the proposed reciprocal tariffs, the US is set to levy a 36% duty on Thai imports. Cambodia, initially facing a 49% tariff, saw its rate reduced to 36% by the US.

 

Thailand had submitted its final trade offer last week, hoping for a swift conclusion to negotiations before the looming 1st August deadline.

 

Many analysts suggest President Trump's instruction to his US trade negotiation team to pause discussions with Thailand and Cambodia was a deliberate strategy, compelling the two Southeast Asian nations to resolve their military stand-off before tariff talks would resume.

 

This means the comprehensive trade deal, despite nearing completion, may not be announced by the deadline, potentially forcing Thai exporters to incur the higher 36% tariff.

 

 

Deputy Prime Minister and Finance Minister Pichai Chunhavajira, whose 'Thailand team' reportedly responded to inquiries from the US Trade Representative (USTR) last week, has expressed hopes for a tariff rate aligning more closely with those applied to other ASEAN countries.

 

 

 

Industry Concerns and Calls for Delay

Poj Aramwattananont, chairman of the Thai Chamber of Commerce, welcomed President Trump's mediation for the ceasefire dialogue, noting its benefit to both nations in reducing casualties and property losses.

 

He stated that the ceasefire and renewed negotiations could initiate a recovery for bilateral trade and economies.

 

However, Visit Limlurcha, vice chairman of the Thai Chamber of Commerce and President of the Thai Future Food Trade Association, warned of dire consequences should the US fail to conclude talks by 31st July.

 

Goods scheduled to arrive in the US from 1st August – orders placed as early as May or June – would face the additional 36% import duty.

 

The US Treasury Secretary, Scott Bessent, explicitly linked the border ceasefire to the tariff deadline.

 

He reportedly informed Thai Foreign Minister Maris Sangiampongsa that countries failing to conclude negotiations by the set date would face the reciprocal tariffs from 1st August 2025, underscoring the US's emphasis on the outcome of the 28th July Malaysia talks.

 

Thanakorn Kasetsuwan, president of the Thai National Shippers Council, urged the Thai government to "turn crisis into opportunity."

 

While acknowledging Thailand's slightly disadvantaged position, he advocated for seeking a deferral of the tariff implementation from the US.

 

 

He suggested reasoning that Cambodia initiated the recent conflict, necessitating Thailand's defensive actions to protect its territory – a legitimate and normal procedure.

 

"I'd like the government to request the US to postpone the tariff implementation period. We can assure the US of our readiness for a ceasefire and for negotiations, as dialogue is the peaceful method Thailand believes in and adheres to, to resolve everything," Thanakorn stated.

 

He further noted that Cambodia's limited exports to the US mean a tariff hike on their goods would have minor impact. In contrast, Thailand's significant export volume means it should actively push for a delay.

 

He warned that if fighting persists, leading the US to withdraw from tariff talks, Thailand would face the 36% duty, severely impacting exports, though he believes exporters have contingency plans.

 

 

 

 

Competitive Disadvantage Looms

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), reiterated that a failure to conclude tariff negotiations by 1st August would subject all Thai goods to a 36% US import duty.

 

This rate is considerably higher than those faced by regional competitors such as Vietnam (20%), Indonesia (19%), and the Philippines (19%), highlighting a significant competitive disadvantage.

 

This could substantially affect key Thai export sectors, including processed food, agricultural products, automotive and parts, electrical appliances, electronic equipment, textiles, gems, steel and aluminium, potentially causing an estimated 800-900 billion baht in export losses.

 

Kriengkrai revealed that Thailand had submitted a second, revised proposal to the US, which differed from the first, particularly in offering zero tariffs on thousands more items. However, a response from the US is still awaited, though hopes remain for the new offer to be considered.

 

He cautioned that such high tariffs could not only significantly impact Thai exports but also increase the risk of future US trade countermeasures due to issues like illegal transhipment of Chinese goods via Thailand.

 

Products directly at risk include furniture, rubber tyres, hard disk drives, rubber gloves, apparel, canned and processed fruits, computers and accessories, ceramics, medical instruments, leather shoes, miscellaneous metals, plastics, air conditioners, canned seafood, and machinery.