Chinese Import Surge Poses Nearly Three Times the GDP Risk of US Tariffs, Thai Think Tank Warns

Thailand Faces a Bigger Threat From Diverted Chinese Goods

Low priced Chinese goods entering Thailand could reduce its gross domestic product by 0.8 to 0.9 percentage points, nearly three times the 0.3 percentage point impact projected from US tariffs, according to the Thailand Development Research Institute (TDRI). The comparison puts competition inside Thailand, rather than duties at the American border, at the centre of the country's trade challenge.

Somkiat Tangkitvanich, president of TDRI, presented the findings at a seminar hosted by the Stock Exchange of Thailand. His assessment challenges the focus on Washington's aggressive tariff policies and points to a larger danger for Southeast Asia's second largest economy: manufacturers losing business as cheaper Chinese products compete with them at home and abroad.

Thailand faces a 19% US reciprocal tariff, with additional duties affecting particular sectors. Washington is also pressing Bangkok to prevent Chinese exporters from using Thailand as a route around American trade barriers. Thai policymakers therefore have to address two different problems, protecting domestic production while ensuring exports meet US requirements.

TDRI's figures describe possible changes to GDP, the value of goods and services produced in an economy. A reduction of 0.9 percentage points would be three times a reduction of 0.3 percentage points. The larger estimate depends on Thai products being unable to compete against the incoming Chinese goods in both domestic and international markets.

As of February 2, 2026, the central policy challenge is how to respond to that competition without preserving rules that already make production in Thailand expensive. The assessment connects the import surge with tariffs on components, restrictions on services, weak product checks and limited use of existing trade agreements.

Why the Direct US Tariff Impact Looks Modest

Thai exports to the United States expanded by as much as 30% from August to November 2025, despite the tariff pressure. Growth covered several product categories, supported by American demand for data centre construction materials, computers and computer parts.

Somkiat said the direct effects of President Donald Trump's tariffs had been limited:

The impact of President Donald Trump's tariffs has not been particularly bad. In terms of direct effects, it can almost be ignored,

Thailand's average US tariff rate of 19% is comparable with rates applied to other countries, according to Somkiat. He said Thailand also retained a slight advantage over Vietnam, a regional competitor.

The rate actually borne by Thailand's export mix is lower than the headline rate because some products receive different treatment. Hard disk drives, for example, face a 0% US tariff. Once individual products were weighted in the calculation, Thailand's effective tariff rate fell from 19% to 16.5% as of August 2025.

Additional sector tariffs on aluminium and steel raised that effective rate to 17.6%. An effective rate reflects the mix of products being exported, rather than applying the headline percentage equally to every shipment. TDRI's economic modelling described this burden as manageable.

The institute estimated a total GDP reduction of approximately 0.3 percentage points from US tariffs. Spread across several years, that would mean an annual reduction of about 0.1 percentage points, which Somkiat described as too small to amount to a major economic setback.

Chinese Imports Are Growing Much Faster

Chinese goods face US tariffs ranging from 30% to more than 50%. With access to the American market restricted, billions of dollars in exports originally intended for the United States are being redirected into Southeast Asia. Thailand is facing its largest influx of Chinese goods in a decade.

Somkiat explained that Chinese production has remained unchanged while access to the US market has narrowed. Goods that cannot enter the United States are consequently being sold elsewhere. This movement is called trade diversion: a barrier in one market pushes shipments toward another.

Independent economist Ath Pisalvanich projected that US tariffs would divert between 69.78 billion and 88.30 billion baht worth of Chinese industrial products into Thailand over the next three years. The products include telecommunications equipment, automobiles, computer hardware and network devices. Thai manufacturers already operating with thin margins face additional pressure from those shipments.

Thai imports from China rose approximately 33% during the first nine months of 2025, compared with growth of about 10% in the corresponding period a year earlier. The import growth rate was therefore more than three times the earlier rate.

The surge threatens to widen Thailand's trade deficit with China from $46.66 billion to $63.63 billion. A trade deficit means Thailand buys more goods from China than it sells there. The projected figures represent a widening of $16.97 billion.

TDRI's simulations put the potential GDP impact at 0.8 to 0.9 percentage points if Thai goods cannot compete against the cheaper Chinese products in either local or global markets. The concern extends beyond a temporary increase in imports: sustained losses of sales could change the shape of Thailand's industrial economy.

What the Trade Figures Show Over Time

The trade figures cover different periods, while the estimates look several years ahead. Keeping those dates together helps explain why strong exports to America and growing pressure from China can occur at the same time.

• During the first nine months of 2025, Thai imports from China grew approximately 33%, compared with about 10% growth in the corresponding period a year earlier.
• As of August 2025, product weighting reduced Thailand's effective US tariff rate from 19% to 16.5%; including sector tariffs on aluminium and steel brought it to 17.6%.
• From August to November 2025, Thai exports to the United States expanded by as much as 30%, supported by demand for data centre materials, computers and computer parts.
• Ath Pisalvanich projected that between 69.78 billion and 88.30 billion baht in Chinese industrial goods would be diverted into Thailand over the next three years.
• The European Union has signalled renewed interest in concluding trade negotiations with Thailand by 2027.

Thailand's export growth to the United States sits alongside a different source of pressure inside its own market. Businesses selling successfully to American customers can benefit from that demand, while manufacturers competing with cheaper imports face declining sales.

Factories and Workers Feel the Pressure

More than 100 factories in Thailand have closed every month for the past two years, according to estimates from local think tanks. Textile and manufacturing businesses have reported falling sales and forced layoffs as competition from cheap imports intensifies.

Indonesia provides another example of the pressures facing businesses across Southeast Asia. Isma Savitri, who operates the sleepwear brand Helopopy, sells popular pyjamas for $7.10. She has seen similar Chinese designs entering the market at roughly half that price.

Savitri described the difficulty facing a small business competing with those prices:

Small businesses like us feel squeezed,

She also described the threat to her company's survival:

We are struggling to survive against an onslaught of ultra-cheap Chinese products.

Approximately 250,000 textile workers in Indonesia lost their jobs over a recent period of two years after around 60 garment manufacturers closed. Those closures included Sritex, once the region's largest textile maker.

Mujiati, a worker aged 50, lost her job at Sritex after 30 years of service. She described the frustration of seeing imported products compete with domestic production while workers had little recourse:

When we see the news, there are lots of imported products flooding the domestic market, which messes up our own market. Who can we complain to? There's no-one.

Thai industry surveys also show substantial losses of sales. The Federation of Thai Industries found that 45% of its member companies reported sales declines exceeding 20% because of cheap or low quality imports. Some imported products were selling at prices that raised concerns about their safety standards.

Why Thailand Must Watch Goods Passing Through Its Borders

Washington has warned that goods suspected of being routed through third countries to disguise their Chinese origin could face transshipment tariffs of up to 40%. Transshipment, in this context, means moving goods through another country before sending them to the final destination.

Somkiat urged Thailand to monitor these activities closely so that the United States does not regard the country as a transit base for Chinese goods headed to American buyers. The risk has become more pressing as Chinese manufacturers establish operations in Southeast Asia specifically to avoid US duties on products made in China.

Arada Fuangtong, director-general of Thailand's Department of Foreign Trade, confirmed that technical tariff negotiations with the United States were continuing. Rules of origin, which determine the country a product is considered to come from, are a particular focus.

Under current US regulations, imported raw materials used in Thailand count as local content only when they undergo substantial transformation. The requirements include changes in the Harmonized System code, the classification used to identify goods in international trade.

Future agreements may instead move toward regional value content calculations. Such calculations examine how much of a product's value comes from qualifying production within a defined region. Washington's definition of a region increasingly refers to alliance partnerships rather than simply to countries located near one another.

Thai exporters therefore face a practical compliance task alongside the tariff itself. They need to understand how their inputs and manufacturing processes meet origin requirements while technical negotiations continue.

Existing Trade Agreements Are Being Underused

Thailand has free trade agreements with 18 countries, yet many exporters do not use the available preferences. These privileges can give qualifying goods more favourable treatment when entering a partner market, provided the exporter meets the agreement's requirements.

Among 930 companies listed in Thailand, 354 engage in exports. Only 193 of those exporters currently use free trade agreement privileges. That leaves 161 listed exporters outside the group using those benefits.

The value of goods benefiting from the agreements totals just $11 billion. The figures point to room for businesses to make greater use of existing market access as Thailand seeks to diversify its exports.

Complex rules of origin and compliance requirements have historically discouraged use of the agreements. Expanding their use therefore requires companies to master the requirements, as well as policymakers negotiating access to additional markets.

Some Thai Tariffs Make Local Production More Expensive

Thailand's tariff pressures have exposed problems in regulations originally intended to protect young industries. Somkiat's assessment is that some of those rules now protect inefficient businesses and weaken competition, leaving the economy less able to adapt.

World Trade Organization commitments have reduced Thailand's official import taxes to roughly 10% on average. Protection nevertheless continues through complicated differences between tariffs on raw materials and those on finished goods.

Electric vehicles illustrate the problem. Fully assembled EVs from China enter Thailand without duty under the Thailand-China free trade agreement, while essential components such as batteries still face tariffs. The arrangement makes importing a complete vehicle cheaper than importing parts for assembly in Thailand.

Coffee import rules create a similar difficulty. Beans imported within a quota face a 30% tax. Shipments above that quota face a 90% tax, while instant coffee imports face a 49% tariff.

For businesses importing beans beyond the quota, the tax on the raw material is therefore higher than the tax on the processed product. These arrangements can favour imports of finished coffee over domestic processing, raise costs and keep new businesses out. Established companies holding historical import privileges benefit from the quota system.

Thailand's services sector has restrictions too. Foreign ownership is capped at 49% in many industries, work permits involve cumbersome procedures, and telecommunications markets have limited competition.

The Service Trade Restrictiveness Index ranks Thailand as the fourth most restrictive country among 51 examined, with little improvement over the past decade. Those restrictions form part of the wider competitiveness problem identified alongside tariffs and import competition.

Weak enforcement of product standards adds another concern. Thailand has become a destination for goods that fail stricter controls elsewhere, leaving domestic businesses competing with imports whose quality and safety may be questionable.

Lower US Tariffs Could Bring Another Import Surge

Krungsri Research examined a scenario in which US tariffs on Thai goods remained at 36%. It estimated export losses of 162 billion baht, with textiles, electronics, food and beverages, and rubber products facing the greatest pressure.

Under that scenario, Thailand's GDP growth for 2025 could fall to 1.5%, compared with 2.1% if a negotiated settlement reduced the tariff to 20%. Those conditional estimates use different tariff assumptions from the 19% reciprocal rate described in TDRI's assessment.

Securing lower US tariffs by offering zero tariffs on American imports would create another competitive pressure at home. Such an agreement could produce a 188 billion baht increase in imports of US agricultural and manufactured goods.

Krungsri's analysis describes this as a "Twin Influx": additional American goods arriving alongside the continuing flow of Chinese products. The policy trade off is straightforward. Better access for Thai exports to the United States could come with more competition for Thai producers in their own market.

Agriculture is particularly exposed because it employs nearly 28.6% of Thailand's workforce. Sensitive domestic sectors could face threats to their survival if both streams of imports rise, making the terms of any market opening consequential for workers as well as exporters.

Somkiat Calls for Trade and Regulatory Changes

Somkiat argued that Trump's tariffs should prompt Thailand to accelerate negotiations for a free trade agreement with the European Union and pursue membership in the Organisation for Economic Co-operation and Development (OECD). His recommendations combine access to new markets with changes to rules that obstruct business activity.

The European Union has signalled renewed interest in concluding negotiations with Thailand by 2027. The Regional Comprehensive Economic Partnership also offers opportunities for deeper integration with regional trading partners.

Market diversification would give Thai businesses more destinations for their products, reducing their dependence on any single market. Its success depends on exporters understanding origin rules and other compliance requirements that have limited use of existing agreements.

Somkiat also called for amendments to laws that create structural obstacles. Without changes to those rules and to the policies behind them, he warned, Thailand would struggle to recover as the trading environment shifts.

The TDRI president put his warning in these terms:

When the rules change but the mindset and policies do not, we will end up worse off than before,

Thailand's challenge is consequently wider than negotiating an American tariff rate. It includes monitoring transshipment, enforcing product standards, correcting tariff arrangements that penalise local production and helping exporters use the agreements already available to them.

The Essentials

• TDRI estimates a potential GDP impact of 0.8 to 0.9 percentage points from Chinese import competition, compared with approximately 0.3 percentage points from US tariffs.
• Thai imports from China grew approximately 33% in the first nine months of 2025, compared with about 10% growth in the corresponding earlier period.
• Ath Pisalvanich projects that 69.78 billion to 88.30 billion baht in Chinese industrial goods will be diverted into Thailand over the next three years.
• Thailand faces a 19% US reciprocal tariff; TDRI puts the effective rate at 17.6% after product treatment and sector duties are included.
• Washington has warned of transshipment tariffs of up to 40% on goods suspected of being routed through other countries to disguise Chinese origin.
• Only 193 of 354 Thai listed exporters use free trade agreement privileges, covering $11 billion in goods.
• Krungsri's conditional scenarios identify risks from both higher US tariffs and a possible 188 billion baht increase in American imports.
• Somkiat recommends faster EU trade negotiations, pursuit of OECD membership and changes to restrictive domestic rules.