Thailand’s US Tariff “Win” Masks Slow Economic Defeat and Irrelevance
Thailand just got squeezed. A 19% tariff from the US, down from a threatened 36%, might sound like a win, and the current government is certainly spinning it that way. But in the brutal logic of global power dynamics, a compromise is often just a slower-motion defeat. This isn’t simply about tariffs; it’s a symptom of a much deeper malaise — a world where “friendship is irrelevant — only mutual interests matter,” as former Finance Minister Korn Chatikavanij put it. Bangkok Post reports on Korn’s sober analysis, and it’s a warning worth heeding. What’s really on display here is the waning power of the “Washington Consensus,” the long-held belief that free trade is always and everywhere a win-win. The Thai situation reveals the uneven distribution of those wins.
This isn’t just about some diplomatic give-and-take. The US demanded concessions — elimination of import duties on over 10,000 American products. Sure, Thai negotiators averted the worst-case scenario. But now, domestic industries, particularly agriculture and SMEs, face a tidal wave of cheaper US goods. That temporary confidence boost the government craves will likely be short-lived, as livelihoods are squeezed and the long-term competitiveness of Thailand erodes. Think of it as a repeat of the 1997 Asian Financial Crisis, but this time the trigger isn’t speculative capital flows, but the slow, grinding pressure of asymmetric trade deals.
The geopolitical chessboard adds another layer of complexity. Thailand must balance its relationships with the US and China, especially with regional tensions simmering along the Thai-Cambodian border. Leaning too heavily towards the US risks alienating Beijing, whose economic clout is increasingly impossible to ignore. This tightrope walk demands deft diplomacy, a skill that seems to be in short supply these days. The tariff deal, however necessary in the short term, casts a long shadow over this balancing act.
“The 19% came at the cost of Thai people’s blood and sweat.”
Korn’s analysis goes further, pinpointing the indirect costs. He anticipates a surge of cheap Chinese goods flooding the Thai market, as China struggles to reroute exports around US tariffs. This creates a double whammy for Thai manufacturers, who now face both American and Chinese competition. The government’s response — low-interest credit packages — is a Band-Aid, not a cure. What’s needed is deep structural reform, innovation, and a relentless focus on competitiveness. It’s not about shielding industries from competition entirely, but about creating an environment where they can actually compete, a point often lost in the rush to embrace unfettered free trade.
To understand Thailand’s bind, it helps to look at the broader history of globalization. Dani Rodrik, for instance, argues that developing nations often face a “policy trilemma” where democracy, national sovereignty, and global economic integration are fundamentally incompatible. Thailand, like many countries, is now confronting that trilemma head-on. Can it protect its domestic industries, maintain its political independence, and participate fully in the global economy? This isn’t a new question; it echoes the debates surrounding import substitution industrialization in the mid-20th century, but with higher stakes in a hyper-connected world.
The rise of populism in both the US and Europe highlights the limits of free trade agreements. The “losers” of globalization — workers displaced by automation or foreign competition — are increasingly vocal, and politicians are responding. While mainstream economists focus on aggregated gains, like in this scenario, these models often gloss over the concentrated pain felt by specific workers, families, and communities when supply chains inevitably shift or new tariff regimes are enacted. It’s a crucial reminder that economic models, no matter how elegant, are always simplifications of a much messier reality.
Finally, this situation raises questions about political leadership. With a fragile coalition government facing scrutiny, talk of a new political force emerges. Outgoing central bank governor Sethaput Suthiwartnarueput, or even a military leader, could be a potential candidate. The very fact that technocrats are being considered as potential leaders speaks volumes about the current political climate, and what citizens deem as necessary to secure the economic future. The potential for a leader like Suthiwartnarueput to take the reins represents a pivotal moment, highlighting a desire for stability and a move away from purely political leadership.
Thailand’s experience with these US tariffs isn’t an isolated event. It’s a microcosm of the challenges facing many developing nations in a world reshaped by protectionism, geopolitical rivalry, and technological disruption. Avoiding complete economic disadvantage in this global climate, as Korn so presciently warns, won’t come from diplomatic luck or external protection. Only internal development, reform, and innovation will lead Thailand to long-term success. The alternative is a slide into irrelevance, a fate Thailand can ill afford, and a cautionary tale for any nation that believes globalization’s promises are always kept.
