U.S. Revises Taxation Framework: Vietnam and Thailand Affected by New Trade Measures, With Thailand Overwhelmed and Limited Success in Five Key Products

Thailand Faces Export Challenges as Vietnam Gains Ground in US Market

bangkok, Thailand – A recent analysis reveals Thailand is losing market share to Vietnam in the crucial US export market, despite holding advantages in just five key product categories. The study, conducted by Assoc. Prof. Dr. Athat Phisanwanich, a leading expert in international economics and ASEAN affairs, highlights the growing competitive pressure and potential economic impact for Thailand.The comparison focused on 24 major products exported by both Thailand and Vietnam to the United States. While Thailand currently leads in rice (96.6% market share), fresh fruit (85.8%), frozen seafood (82.8%),rubber gloves (88.5%), and transformers & equipment (60.1%), Vietnam dominates in most other areas.

A important factor contributing to Vietnam’s success is pricing.Vietnamese products are, on average, 5-10% cheaper than their Thai counterparts. Coupled with a price elasticity of demand of 0.8%, even a small price difference can substantially shift consumer preference. The analysis indicates that a 5% price reduction in Vietnamese products coudl lead to a 4% increase in US consumer purchases, rising to 8% as consumers readily substitute based on cost.

The impact of US tariffs is also playing a role. The study projects that US tariffs will reduce Vietnam’s exports by $18.9 billion and Thailand’s by $8.16 billion. Factoring in the substitution affect between the two countries, Thailand’s total export value is expected to decrease by 457.38 billion baht for the entire year. This translates to a projected decline of 190.575 billion baht (approximately 1.9% of total Thai exports) over the remaining five months of 2025 (august-December).

To mitigate these challenges, Dr. Athat proposes several key strategies for the Thai goverment:

Strengthen National Strategy: Accelerate the national strategy for product management, especially focusing on products with less than 40% Thai origin content. Collaboration with the US Trade Representative (USTR) to implement a “Digital Traceability” inspection system is also crucial.
Diversify Industry: Foster the development of new thai industries that can tap into diverse markets while maintaining a foothold in the US.
Restructure Production: Prioritize a serious adjustment of the production structure, focusing on adding value to both agricultural and industrial products to align with global trends.
Revise Investment Regulations: Implement new investment regulations that incentivize foreign capital to integrate and utilize materials from Thai smes and farmers, increasing this reliance annually.

These measures are seen as vital to bolstering Thailand’s export competitiveness and safeguarding its economic future in the face of increasing competition from Vietnam in the US market.

How do the U.S. tax revisions and increased tariffs specifically impact Thailand’s automotive industry, considering its reliance on exports to the U.S.?

Understanding the U.S. Taxation Shift & Its Global Impact

The United States recently enacted important revisions to its taxation framework, impacting international trade dynamics. These changes, primarily focused on bolstering domestic manufacturing and addressing trade imbalances, are directly affecting key Southeast Asian economies – notably vietnam and Thailand. While both nations face challenges, the impact on Thailand appears especially acute, with limited success observed in five crucial export sectors. This article delves into the specifics of these changes, analyzes the repercussions for both countries, and highlights the specific struggles Thailand is encountering. We’ll cover U.S. trade policy, tax implications for exporters, and Southeast Asian trade challenges.

Key Changes in the U.S. Taxation Framework

The revised U.S. taxation framework centers around several key provisions:

Increased Tariffs on Specific Goods: Targeted tariffs have been implemented on imports from countries deemed to be engaging in unfair trade practices. this includes certain steel, aluminum, and manufactured goods.

Border Adjustment Tax (BAT) Considerations: While a full BAT hasn’t been implemented, elements resembling it – such as increased scrutiny of transfer pricing and a focus on the origin of components – are now prevalent.

Tax Incentives for Domestic Production: Significant tax breaks are being offered to companies that relocate manufacturing operations back to the U.S. or expand domestic production capacity. This is a core component of the “Made in America” initiative.

Digital Services tax (DST) Response: The U.S. has responded to DSTs implemented by other countries with retaliatory tariffs, impacting digital trade flows.

Foreign-derived Intangible Income (FDII) Adjustments: Changes to FDII rules impact how U.S. companies are taxed on income derived from exports, perhaps influencing investment decisions.

These changes collectively aim to reshape the global supply chain and incentivize domestic production within the United States. Understanding these U.S. tax reforms is crucial for businesses operating in international trade.

Vietnam’s Response and Adaptations

Vietnam has demonstrated a relatively agile response to the U.S. taxation changes.While facing challenges, the country has leveraged its existing strengths and pursued strategic adaptations:

Diversification of Export Markets: Vietnam is actively diversifying its export markets beyond the U.S., focusing on the EU, Japan, and other Asian nations. This reduces reliance on a single market.

Investment in Value-Added Manufacturing: The Vietnamese government is encouraging investment in higher-value manufacturing processes, moving away from solely relying on low-cost labor.

Free Trade Agreements (FTAs): Vietnam’s participation in numerous FTAs, including the CPTPP and EVFTA, provides alternative trade routes and preferential access to other markets.

Attracting Foreign Direct Investment (FDI): Vietnam continues to be an attractive destination for FDI, particularly in manufacturing, helping to offset potential losses from U.S. trade measures.

Supply Chain Resilience: Companies are actively building more resilient supply chains,reducing dependence on single suppliers and diversifying sourcing locations.This is a key aspect of Vietnam trade strategy.

thailand’s Struggles: A Deeper Dive

Thailand, however, is experiencing a more significant and challenging impact. The country’s reliance on specific export sectors and slower adaptation strategies have left it particularly vulnerable. The situation is characterized by:

Over-Reliance on Five Key Products: Thailand’s export portfolio is heavily concentrated in five key products: automotive parts & vehicles, computer equipment & parts, rubber products, electrical circuits & equipment, and plastic products. These sectors are directly targeted by the U.S. tax revisions and increased tariffs.

Limited Success in Diversification: Efforts to diversify export markets have been less prosperous than in Vietnam, with Thailand remaining heavily dependent on the U.S. market for these key products.

Slow Adoption of Value-Added Manufacturing: The transition to higher-value manufacturing has been slower in Thailand compared to Vietnam, leaving the country exposed to competition from lower-cost producers.

Impact on Automotive Sector: The automotive industry, a cornerstone of the Thai economy, has been particularly hard hit by increased tariffs on automotive parts and vehicles.This has led to production cuts and job losses.

* Challenges in the Electrical & Electronics Industry: The electrical and electronics sector is facing increased competition from countries with lower production costs and more favorable trade agreements.

Specific Product Performance (2024-2025 YTD):

| Product Category | Export Growth to U.S. | Overall Export performance |

|—|—|—|

| Automotive Parts & Vehicles | -15% | -8% |

| Computer Equipment & Parts | -10% | -5% |

| Rubber Products | -5% | +2% (Diversification to other markets) |

| Electrical Circuits & Equipment | -12% | -7% |

| Plastic