Thailand aims to complete ART for lower US tariff, Commerce VM says

Thailand is targeting to finalise an agreement for reciprocal trade, but the country is set to face a new wave of tariffs, according to Thailand’s Vice Minister for Commerce.

Dr Kirida Bhaopitchir, Thailand’s Vice Minister for Commerce, told The Nation’s Franc Han Shih that Thailand is aiming to complete an agreement with US authorities, but another tariff under Section 301 could further impact Thai exports.

“Under Section 301, I just want to explain briefly that the U.S. would have to charge countries that they want to raise the tariff rate of some wrongdoing, according to the trade with the U.S. 

And then they can then charge us with cases, they can be as many cases as they want. And then if we are found guilty, then they will raise tariff rates as a punishment for the cases. So the 12.5% that we heard a few weeks ago was actually Section 301, Case No. 1,” Kirida said.

Thailand’s current 12.5% tariff under the first Section 301 case represents a reduction from the 36% rate announced by US President Donald Trump last year, which was later reduced to 19% on the condition that Thailand agree to an Agreement on Reciprocal Trade (ART).

However, negotiations on the ART had not been completed when the US Supreme Court ruled in February that the previous tariff measures were illegal. The United States subsequently turned to Section 301 as another tool to raise tariff rates.

Under the first Section 301 case, Thailand was among 38 countries subject to a 12.5% tariff because it does not yet have laws or measures preventing imports of goods produced using forced labour. 

Countries with such measures, or those that have already agreed to the ART, face a 10% rate under the case. Thailand plans to submit legislation addressing forced-labour imports to Parliament next year.

Kirida noted that the government is pursuing several measures to limit the impact of the tariff, as Thailand is seeking additional exemptions for products covered by the Section 301 measure, after the US Trade Representative (USTR) issued an exemption list covering more than 2,000 products.

“Those products already account for more than 60% of Thailand’s total export value to the United States”, she said, adding that the government will seek further exemptions.

Once Thailand’s forced-labour legislation becomes effective, the government will also ask the USTR to review the first case with the aim of reducing the tariff from 12.5% to 10%. 

However, Kirida stressed that this would address only the Case 1 under Section 301, with another case still pending.

The Case 2 could create a further tariff burden because the US has accused Thailand of having structural excess capacity, particularly in sectors including cars and car parts, rubber and rubber products, and machinery.

According to Kirida, the US alleges that government subsidies have encouraged excessive private-sector investment, resulting in production capacity that is not fully utilised. The US is concerned that Thailand could use this spare capacity to increase exports to the American market and widen the US trade deficit.

However, Thailand has rejected the allegations, arguing that investment decisions are largely made by the private sector and that there is limited excess capacity in the industries cited by the US.

“We actually showed them the figures that our capacity utilisation is 75 to 95 percent. So it’s almost 100 percent already. There is not much excess capacity left,” Kirida said.

The government has submitted written explanations and met USTR officials in person, but Washington has not yet set a date for announcing its decision on the second case.

Kirida said Thailand expects the verdict to come within the next few weeks. If additional tariffs are imposed, they would be added on top of the existing 12.5% rate rather than replacing it.

“If the Case 2 comes out to, let’s say, six percent, then it’s 12.5 plus six,” she said, explaining that the tariffs from individual cases would stack on top of each other.

Beyond defending Thailand against the Section 301 cases, the government sees completion of the ART as a key strategy for containing the overall tariff burden.

“We will try our best to conclude the ART as much as we can,” she said. “We might not be able to conclude 100 percent with them because it’s a long list of requests that the U.S. has made for every country, including Thailand. But we will respond to most of them positively.”

Thailand is also considering measures that could create greater economic benefits for both countries as part of the negotiations.

Meanwhile, Thailand is also addressing another US concern, transshipment, particularly of Chinese goods through Thailand.

Kirida said the United States wants Thailand to reduce transshipment from China, which will also be taken into consideration when Washington determines the tariff rate for Thailand. The government is therefore working to reduce transshipment and address related concerns as part of the broader trade negotiations.

For now, the government’s focus remains on Section 301, the pending Case 2 and the completion of the ART, as Thailand seeks to prevent further tariff increases and preserve the competitiveness of its exports in the US market.

Thailand will send a trade delegation to the United States from August 27 to September 1 in a fresh push to conclude negotiations on an Agreement on Reciprocal Trade (ART), according to the Department of Foreign Trade (DFT).

The delegation’s visit comes as Thailand faces uncertainty over the 12.5% US tariff linked to Washington’s concerns over measures to prevent imports of goods produced using forced labour, while the outcome of a second Section 301 case could bring additional tariffs over alleged structural excess capacity.