Thailand's export sector is facing a turbulent period as it grapples with mounting external pressures, particularly from the United States' impending import tax measures and Europe's Carbon Border Adjustment Mechanism (CBAM). These developments threaten to reshape the landscape of global trade and pose significant challenges for Thailand's export-driven economy in 2025 and beyond.
According to the Thai Chamber of Commerce, exports in the first half of 2025 performed robustly, with a 15% growth compared to the same period last year, reaching a value of $166.85 billion. This surge was largely driven by a last-minute rush from US importers seeking to avoid the full impact of the new US tariffs scheduled to take effect on August 1, 2025. Imports also grew by 11.6%, resulting in a slight trade deficit of $62.2 million. However, experts warn that this positive momentum is unlikely to continue into the second half of the year.
Mr. Wisit Limluecha, Vice President of the Thai Chamber of Commerce, highlighted that while the first half's growth was buoyed by the anticipation of tariff changes, the second half could see a sharp contraction. "The full implementation of the US import tax and the strength of the Thai baht will likely cause exports to slow down significantly," he said. The US tariff, potentially as high as 36% for some Thai food products, is expected to severely undermine Thailand's competitiveness. The Food Industry Group of the Federation of Thai Industries (FTI) has already observed a 30% drop in container bookings to the US in July, signaling the beginning of a downturn that could extend into 2026.
Thailand's food export sector, which accounted for approximately 10% of the country's total food exports to the US in 2024—valued at 1.6 hundred billion baht—is particularly vulnerable. Products such as canned seafood, frozen fruits and vegetables, jasmine rice, and popular sauces like Sriracha face the brunt of these tariffs. Mr. Charoen Kaewsuksai, Chairman of the Food and Beverage Industry Group at the FTI, warned, "If Thailand faces a 36% import tax, it will be nearly impossible to compete. US importers have already indicated they cannot absorb such high tariffs, and Thai producers typically operate on slim profit margins of around 5%." The risk extends beyond large manufacturers; smaller businesses that form the backbone of the supply chain—comprising around 100,000 factories and involving 2-3 million workers—may be forced to shut down, which could ripple through the economy and slow GDP growth.
In response, the Thai government and industry leaders are pushing for a diversification of export markets. Potential growth regions include South Asia, the Middle East, Africa, and South America, as well as countries with robust GDP growth like India, Indonesia, and Vietnam. However, transitioning to new markets is a lengthy process, often requiring over a year to establish footholds.
Compounding the US tariff challenge is the European Union's CBAM, set to take effect on January 1, 2026. This mechanism imposes a carbon tax on imported goods based on their carbon footprint, aiming to level the playing field for EU producers who face stringent environmental regulations. While CBAM currently applies to sectors like aluminum, cement, fertilizers, hydrogen, iron and steel, and electricity, it is expected to expand to cover nearly all imports in the near future.
Thailand, which exports nearly 10% of its goods to Europe, must therefore prepare for this new carbon-conscious trade environment. The Greenhouse Gas Management Organization (TGO) has been proactive, developing systems for carbon footprint assessment and certification for over a decade. These include digital carbon labels such as Carbon Footprint Reduction (CFR) and Carbon Footprint of Product (CFP), verified by third parties to ensure international credibility. TGO also provides detailed guidelines and digital platforms to help exporters calculate and report embedded emissions, especially for industries affected by CBAM.
Experts emphasize that transparent carbon footprint disclosure will become a vital competitive advantage. "Whoever emits more carbon will pay higher taxes, while those who provide clear carbon data will gain market trust and benefits," noted environmental analysts. Thailand is encouraged to support SMEs in assessing their carbon footprints and promote low-carbon products through government incentives like tax rebates. Additionally, leveraging climate action as a form of soft power in trade negotiations—especially with the EU and UAE—could open new opportunities for Thai agricultural and food products.
Meanwhile, the manufacturing sector shows signs of resilience but remains under pressure. The Office of Industrial Economics (OIE) reported a Manufacturing Production Index (MPI) of 97.35 in June 2025, marking a modest 0.58% year-on-year growth and the third consecutive month of expansion. Capacity utilization stood at 59.58%, with automotive production leading the gains. Stimulus measures such as the "Our Aid" program and recent interest rate reductions by the Monetary Policy Committee have supported this uptick.
However, uncertainty about the outcome of trade negotiations with the US continues to weigh heavily on industrial confidence. Other factors dampening sentiment include geopolitical conflicts, the influx of foreign goods, a strong Thai baht, and sluggish private consumption due to household debt concerns. The tourism sector's slowdown has further impacted related industries. OIE forecasts that the MPI growth for the full year 2025 may range from 0 to 1%, contingent on the clarity of US tariff policies and corresponding government measures.
Adding to the complexity is the ongoing border conflict between Thailand and Cambodia, which has led to the closure of key trade zones. This disruption threatens to reduce Thai exports to Cambodia by an estimated 60 billion baht if unresolved. The conflict also affects approximately one million Cambodian workers in Thailand, half of whom hold legal permits, potentially leading to labor shortages in sectors like construction, wholesale and retail trade, agriculture, livestock, and animal processing. The tourism industry has felt the impact as well, with around 8,000 Cambodian tourists canceling trips and some flight cancellations due to airspace restrictions.
In light of these multifaceted challenges, Thailand's Ministry of Commerce is actively negotiating with the US Trade Representative (USTR) to secure a more favorable tariff rate before the August 1 deadline. The goal is to align Thailand's tariffs with regional competitors like Vietnam (20%), Indonesia (19%), and Japan (15%). Failure to reach an agreement risks losing market share and facing additional tariffs, including those targeting transshipment practices. The ministry also advocates for structural reforms to transition Thailand's export economy toward future industries, emphasizing the development of domestic supply chains and enhancing the country's global trade competitiveness.
Krungthai COMPASS research echoes these concerns, projecting that while exports grew 15.5% in June 2025, this represents a slowdown from previous months and is partly fueled by temporary factors such as accelerated shipments ahead of tariff changes. Key export products showing strong growth include animal and vegetable fats and oils, fresh and processed fruits, rice products, and prepared foods, while staples like rice and canned seafood have declined.
Ultimately, Thailand faces a critical juncture. The convergence of US tariffs, European carbon regulations, geopolitical uncertainties, and currency fluctuations demands swift adaptation. Embracing sustainability, diversifying markets, and enhancing industrial resilience will be essential strategies for navigating this challenging era. As Mr. Poonpong Naiyapark, Director-General of the Trade Policy and Strategy Office, aptly put it, "Balancing trade with the US is an opportunity for Thailand to accelerate its transformation toward future industries and build a robust domestic supply chain to mitigate risks." The coming months will reveal how effectively Thailand can steer through these global trade storms.
