The shock, chaos and negotiations behind Thailand’s trade deal

When US President Donald Trump made his dramatic message about the tariffs on April 2, the shock was nowhere more than in Southeast Asia, a region whose whole world and economic model was built on exports.

The levies reached 49% for some countries, hitting a number of electronic exporters industries in Thailand and Vietnam to chip manufacturers in Malaysia and Cambodia clothing factories.

“I remember waking up in the morning. It was quite early and I saw him stand there on the grass of the White House with his board. I thought,” Did I see that right? 36%? How can it be? “Says Richard Han, whose father founded Microelectronics Hana, one of the largest contract producers in Thailand.

Thailand, which faced a 36% fee, now has a deal, like most of its neighbors to reduce rates to 19%.

The negotiations dropped to the wire, finalized only two days before the deadline was set – August 1. It was a completed process that goes there, and there are still very few details about what was agreed.

The 10 countries in ASEAN, as the regional block of Southeast Asia is known, exported goods worth $ 477 billion ($ 360 billion) to the United States in 2024. Vietnam is the most exported economy, its exports to the US totaling $ 137 billion, comprising about $ 30, comprising about $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 30 from a $ 13 billion from a $ 13

At the time, it is no surprise that the Vietnamese government first gave up the block to negotiate with the United States, and the first in the region made a deal to reduce the criminal 46% percentage that Trump had imposed on them.

According to the US President, The deal reduces tariffs to 20%, While he claims that Vietnam will no longer impose any tariffs for any imports from the United States. It is significant that the Vietnamese leadership said nothing about the deal.

There are no details, no written or signed documents, and some reports suggest that Vietnam disagrees with Trump’s numbers. But they place the bar for other countries in the region.

Indonesia and the Philippines followed transactions that reduce their rates to 19%, although none of the countries depends much on exports to the United States.

Thailand exports a lot to the United States. Last year, they won more than $ 63 billion, about one fifth of his total exports. Thailand also had to be at the forefront of Washington’s queue, asking for a reduction of 36% tariff that Trump had determined.

But Thailand is not Vietnam, a one -party communist country where critical decisions can be made quickly by several leaders, with little need to worry about business or public opinions.

More recently, such as South Korea and Japan, whose deals came after many disputes, although they are unwavering American allies, Thailand must also fight domestic politics and public opinion. Thailand also has a weak and wicked coalition government viewed to a number of interests.

Even worse, it is that the decisions that are needed that were not fully related to trade have angered the country of the United States.

In February, he sent 40 asylum seekers to Uighur who had been stuck in Thailand for more than a decade back to China, opposing warnings by US Secretary of State Marco Rubio. A Thai sales officer told the BBC that the US negotiators are still raising Uyghurs as a complaint in Tariff Calls in May.

Then a regional army commander filed a complaint with Lèse-Majesté against an American academic, resulting in closed and then forced to leave Thailand. So, far from being in front, Thailand ended up in the back of the tail.

The other difficulty faced by the Thai sales team was what the United States wanted in exchange for a reduction in the tariff rate, more special access to the agricultural market of Thailand, which is highly protected.

Food is a big business in Thailand. CP Group, one of the world’s agribusiness giants, is the biggest company in the country. This US search was painful for Thailand.

“Vietnam opened the Pandora box,” says another Thai trade official. “By offering zero percentage rates for all US imports, they make it difficult for those of us who cannot easily open all sectors for competition in the United States.”

Three hours by car from Bangkok, in Nahon Nayk, Worawut Siripun holds 12,000 pigs – an important business in Thailand; The Thai eat a lot of pork. He is active in the Thai pigs Association and has lobbying against the elimination of pork rates in the United States.

“US farmers produce a much larger scale than us, and their costs are lower. So the price of their pork meat will be lower and home farmers will not be able to survive.”

Access to the agricultural market was also a sticky moment in negotiations with Japan, which seeks to protect its rice farmers and continues to be one of the main obstacles with India.

In Thailand, it is alleged that Agribusiness giants as CP also lobby against US demands to open other sectors such as poultry and corn. There were terrible meetings between the sales team and the cabinet ministers after every round of tariff conversations in Washington, the BBC understands.

But on the other hand, they are the manufacturers of Thailand, who are a much more contribution to GDP than agriculture. They needed a deal badly.

“If we receive 36%, it will be terrible for us,” said Suparp Sunpimolkul, a deputy director of SK Polymer, before the deal is announced. The company makes a puzzling massif of rubber components and synthetic materials for washing machines, refrigerators, air conditioners.

“I guarantee that you will find at least one of our products in your home,” he said.

Sk Polymer was founded by Suparp and his two brothers in 1991. Its history is the history of modern Thailand, descended from their father’s small family business, but to ride the explosive growth of global trade, which is the basis of Thailand’s economy.

They are an integral part of a sophisticated supply chain where their products join other components from multiple countries to make consumer, industrial or medical goods for export. About 20% of the company’s income comes from the United States, but the number is much more large when products that contain its components are included. Trump’s tariffs threw a wrench in the works.

“We have small margins,” Supark said. He said they could still deal with tariffs up to 20% or even 25% by reducing costs. When he talks to the BBC before the deal is announced, he said that uncertainty is the biggest challenge: “Please – to our government, just get the deal so we can plan our business.”

A 20% fee is also enjoyable for electronics manufacturers, a large industry in Thailand.

“If everyone in this region is about 20%, our buyers will not look for alternative suppliers – this will be just a tax, such as VAT, for us consumers,” says Richard Han, CEO of Microelectronics HANA. The company makes the main components that come into everything in our digital life: PCBs, integrated schemes, RFID pricing markers.

G -H Khan says that only about 12% of his products go directly to the United States, but like the SK Polymer, the proportion that goes indirectly, as part of other goods produced, is much higher. But not only the tariff number bothers him.

Its concern is transportation, the US accusation that China is avoiding tariffs by route its production through Southeast Asia. Already Vietnam, according to President Trump, will pay 40% – a doubling of the new tariff rate – on goods that US judges will be sent.

Both Thailand and Vietnam saw that foreign investments were significantly increasing after the tariffs were imposed on China at the first Trump period and their exports to the US increased. Some of these were Chinese companies that moved production; Some were products using many more Chinese components. And they are not just from China.

In another electronics manufacturer, SVI, the robots slid up and down the assembly line, bringing hundreds of small components to assemble chains in machines that cost hundreds of thousands of dollars. A quick look at the labels showed that the components came from Malaysia, the Philippines, Taiwan and China.

SVI makes security cameras, custom -made amplifiers, medical equipment, to any specification of their customers, which are mainly in Scandinavia, want. The vital production sector in Thailand is part of an extremely sophisticated global supply chain that is almost impossible to rearrange to respond to the US president’s demands.

According to the rules of a hundred product, it is considered local if at least 40% of its value is added to the local production process or if it is “substantially transformed” into a new product, the way the iPhone becomes something different once assembled.

The Trump administration does not pay attention to the rules of a hundred and it is unclear what will be considered trans-supply, but Mr Khan is afraid that this may be a bigger problem for Thai companies than the standard tariff rate if the United States insists on more local components or less than China.

“Southeast Asia relies very much on China,” he explains. “China, so far, has the largest supply chain for electronics and many other industries, and they are the cheapest.

“We could buy materials from another part of the world. It would be much more expensive. But it would be almost impossible Thailand or Vietnam or the Philippines or Malaysia to get a very high threshold, say 50-60%made in that country. And if it is a condition to receive the American certificate of origin, then no one will receive the certification of origin.”

Very few of these details have been disclosed for the moment. Although President Trump claims that there are zero rates for goods in the United States entering the Philippines and Indonesia, both sides said this was not correct and this should still be agreed.

For the Thai government, it started so late and struggles to respond to US demands, only getting a deal will be a relief.

They will worry about how to get the deal to work later, as the details are developed, which usually takes years. And in that, they are far from being alone – rich and developing economies are struggling to keep up with Trump’s policy for mercurial tariffs.

“At one point, this should stop. It should surely stop?” D -H Khan says. “The problem is that we don’t know what the rules of the game will be, so we all grind, we’re just waiting to understand how to play the new game.”