Thailand faces two US Section 301 proceedings as tariff expiry nears

As the United States’ temporary 10% import tariff, imposed for 150 days, nears expiry on Friday (July 24, 2026), the United States is therefore turning to Section 301 as a longer-term tool for imposing tariffs on trading partners.

Kirida Bhaopichitr, Vice Minister for Commerce, said Thailand is facing two major cases involving US allegations under Section 301.

The Ministry of Commerce has assessed the situation and prepared a response to ensure that the Thai economy is “hurt as little as possible”.

Under Section 301, the United States can allege that a trading partner has breached certain conditions, or claim that trade with that country imposes a burden and causes harm to the United States.

The first allegation concerns the absence of laws barring goods made with forced labour.

The United States alleges that Thailand and 60 other countries lack traceability measures or laws preventing imports of goods produced with forced labour abroad.

Although Thailand is due to submit an HRDD bill to parliament in 2027, the United States has made an initial proposal to impose a 12.5% tariff on Thailand and more than 45 other countries.

Another 14 countries, including Malaysia, Indonesia and Cambodia, accepted 100% of the terms of their Agreements on Reciprocal Trade (ARTs) with the United States and therefore qualified for a reduced 10% tariff.

The second case concerns alleged excess production capacity.

The United States is scrutinising 16 countries with large trade surpluses and alleges that government investment subsidies have created excess capacity that could be used to dump goods on the US market.

The United States claims that Thailand has a capacity utilisation rate below 60%, focusing on three main industrial groups: 1. motor vehicles and automotive parts; 2. rubber and rubber products; and 3. machinery, including electrical appliances, air conditioners and semiconductors.

To counter the allegation, a Ministry of Commerce team travelled to brief the Office of the United States Trade Representative (USTR) in mid-May 2026, presenting data to show that “Thailand’s capacity utilisation is not below 60%, as alleged”.

The data also showed that most of the targeted industries were operating above 70% capacity, with some close to 100%.

The ministry also worked with the Thailand Board of Investment (BOI) to affirm that Thailand was not heavily subsidising the private sector.

The initial outcome was that the United States asked only 17 questions of Thailand, all of which were answered within two hours.

This was fewer than the 29 questions put to Malaysia, 32 to Vietnam and 36 to Indonesia.

The United States has not yet announced its decision in the second case, but an announcement is expected soon.

Under the process, an initial decision would be followed by a public comment period of 3–4 weeks before the final decision is announced.

Thailand and the other 15 countries accused in the case will then face a penalty in the form of “higher import tariffs” than their existing rates.

A question many people have asked is: “Why has Thailand not accepted 100% of the ART terms to secure the same 10% tariff rate as Malaysia or Indonesia?”

Bhaopichitr said the Ministry of Commerce had weighed the interests involved and concluded that accepting all US conditions could harm domestic businesses and consumers in other ways.

These could include changes to trade-restrictive measures or a requirement that Thailand refrain from trading with any party with which the United States does not trade.

Thailand therefore chose to negotiate only on “terms it could accept”, even though this could leave its tariff about 2.5% higher than those of regional competitors.

She described the decision as “sacrificing a pawn to save the king” to protect the country’s overall interests.

The Ministry of Commerce believes that if the final tariff outcome places Thailand in the “middle range” within ASEAN, the country will remain competitive in the US market.

Bhaopichitr said Thailand has safeguards and a strategy to “diversify risk” in this equation.

Although Thailand’s tariff costs may be 2.5% higher than those of competitors, Thai products stand out for their quality, distinctive characteristics and trusted brands.

One example is Delta Electronics, which sends as much as 50% of its exports to the United States; its products are highly specialised, and US customers trust the company and are reluctant to change suppliers.

Relocating production to avoid a 2.5% tariff difference would mean spending time rebuilding relationships and trust, which is often not worthwhile for buyers.

Thailand is also accelerating its push to “diversify risk” by entering new markets, an effort described as highly important.

In the past, Thailand relied on the US market for nearly 20% of its total exports, creating a risk if trade barriers were imposed.

The key strategy is therefore to reduce dependence on a single market, with the Ministry of Commerce stepping up negotiations to expand into new markets such as the Middle East, Africa and Latin America, diversify risk and provide alternatives.

The final approach is to use Thailand’s “neutrality” to attract investment.

At a time of clear global polarisation, Thailand has positioned itself appropriately as “neutral”, allowing it to welcome investment and trade from all sides.

This strength has enabled Thailand to benefit from production relocations in new supply chains, particularly in electronic components, printed circuit boards (PCBs) and AI-related technologies, which are increasingly flowing into Thailand as new production bases are established.

Source: Bangkokbiznews