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[BANGKOK/SINGAPORE] Washington’s latest round of tariffs have jolted South-east Asia, with Thailand and Cambodia potentially bearing some of the heaviest blows.

Unless US President Donald Trump’s administration backpedals on the reciprocal tariffs – or fresh negotiations bear fruit – the aftermath could cut deep, with analysts expecting Thailand’s gross domestic product growth to be shaved by as much as 1.2 percentage points, and that of Cambodia, up to 0.8 percentage point.

Thailand: Things could get “dirty”

Trump on Wednesday (Apr 2) slapped a steep 36 per cent tariff on Thai goods – more than double what analysts had expected and a move that they warn could lop 1.2 percentage points off GDP growth this year.

The levy, which takes effect on Apr 9, threatens key Thai exports from canned tuna to automotive parts. It also risks undermining the country’s gains as a foreign investment alternative to China – a situation facing Thailand’s regional peers as well.

The US is Thailand’s top export market, accounting for 18 per cent of its US$301 billion in outbound shipments in 2024. The kingdom is also America’s oldest ally in South-east Asia, with their diplomatic ties dating back to 1833.

Analysts and officials had expected a tariff of 10 to 15 per cent on Thailand. But Trump’s team justified the 36 per cent rate as a “reciprocal” response to what it claims is the 72 per cent duty, on average, that the kingdom imposes on US imports. The figure includes non-tariff barriers.

“We calculate our average import tariff on US goods at 9 per cent,” said Thai Prime Minister Paetongtarn Shinawatra, shortly after the US tariffs were unveiled. “I think we can negotiate,” she told a press conference.

Bigger economies will likely beat Thailand to the front of the queue in Trump’s post-tariff trade talks.

“While Japan, South Korea, Indonesia and India can bargain with the US to lower tariff rates, I don’t think Thailand has much capacity to do so,” Koraphat Vorachet, a research analyst at Krungsri Securities, told Bangkok Post.

The research house expects the tariffs to pare 0.6 to 1.2 percentage points off the kingdom’s GDP this year.

While some industries such as electronics may be spared – semiconductors are excluded from the tariffs for now – grey zones remain around key components like power modules and printed circuit board assemblies.

Thailand’s top export items to the US last year included electrical and electronic equipment (valued at US$17.6 billion), machinery and boilers (US$13.6 billion), rubber and rubber products such as tyres (US$5 billion), and vehicles and automotive parts (US$2.4 billionn), based on Bank of Thailand figures.

Thailand-made completely built-up cars already face a 25 per cent levy that went into effect on Wednesday, but the country does not export many of these products to the US.

More notable are exports of automotive parts, which will not face a 25 per cent tariff until May 3. Thailand’s electronics industry, which led the kingdom’s export performance in 2024, is expected to benefit slightly from a loophole in Trump’s tariff net that for the moment excludes semiconductors.

Thai electronics giants such as Delta Electronics, Hana Microelectronics, KCE Electronics and Cal-Comp Electronics (Thailand) generate between 20 and 35 per cent of their revenue from the US. Meanwhile, food processing giants like Thai Union Group, which derives about half of its revenue from America, are at risk of a direct hit.

Thai Union may shift some operations to lower-tariff markets such as Seychelles or Ghana, but smaller processors have no such lifeline.

Adding to the uncertainty is how the US and Thailand calculate their trade imbalance. While the Thai Ministry of Commerce cites a US$35.4 billion surplus in 2024, Washington’s figures put it at US$45.6 billion – placing Thailand 11th on the US’ “Dirty 15” list of top surplus countries.

Thailand is now exploring tariff cuts on US goods such as soybeans, corn and beef, which it needs to import regardless. “We have to import these items anyway, because we don’t have enough (of them),” said Sanan Angubolkul, chairman of the Thai Board of Trade.

But experts warn that the greater risk lies beyond trade flows. Trump’s renewed tariff push could undermine foreign direct investment in Thailand, which has benefited in recent years as businesses sought to sidestep US-China tensions by shifting operations out of China.

Cambodia: No trump card

Among Asean member states, export-driven Cambodia was slapped with the heaviest US levy at 49 per cent. Unlike its larger neighbours, the kingdom has few cards to play.

Economists across the board agree that the country’s economy, which counts the garment industry as a pillar, could be badly hit.

“Cambodia is destined to brace for a material external shock,” said economist Mu Haoxin, who specialises in thematic research for the Asia-Pacific at Natixis Corporate & Investment Banking.

Given its lack of purchasing power and narrow fiscal wiggle room, the kingdom is unlikely to meet the US’ demands to raise its imports of American goods. Stephen Olson, visiting senior fellow at the Iseas-Yusof Ishak Institute, noted: “In the short term at least, I expect Cambodia to keep its head down and weather the storm.”

The US is the single largest source for Cambodian exports – and more than Vietnam, China, Japan, Thailand, Germany and Canada combined. Substituting the US market will not be realistic in the short term, said Mu.

Even so, analysts believe that the writing was on the wall, not least because of Cambodia’s massive trade imbalance with the US.

“The fact that the poorest countries are subject to the highest tariff rates reflects that it’s not based on reciprocal trade, but bilateral trade deficit for the US,” added Mu.

Cambodia exported US$7.4 billion of goods to the US in 2023 while importing only US$250 million. This translated into a trade surplus of 97 per cent of total exports to the US, explained the economist.

There are other reasons, too. “The US has a long list of complaints about Cambodian trade practices,” said Olson.

These include high tariffs, weak intellectual property rights protection, e-commerce barriers and restrictions, various investment restraints, and endemic corruption – all of which have challenged American and other foreign firms doing business in the country.

Growth will suffer as well. Maybank forecast a 0.8 per cent downgrade to its earlier 2025 GDP expansion projection of 5.8 per cent.

Maybank economist Brian Lee said: “Multinational corporations may pause on fresh foreign direct investment given the uncertainty over trade policies, broader trade war and excess capacity displaced by the US tariff wall.”

Noting that the tariffs will take a “heavy toll” on Cambodia’s economic growth, Natixis’ Mu pointed out that suitcases or bags and apparels would likely be the most impacted, as they form the largest share of the kingdom’s exports to the US at 29 per cent.

“It’s worth noting that semiconductors also contributed a significant 14 per cent of exports to the US,” he added. “Apparently, they all come from Chinese-invested plants, which are exempted due to the ongoing investigation, but (they) will take a hit eventually when tariffs are imposed.”

Cambodia could also suffer a double whammy with its foreign exchange reserves declining, in the wake of net exports being slashed. Net exports are a major recovery driver for the kingdom’s current account balance.

“Although Cambodia’s forex reserves stand at a relatively safe level of eight-month import coverage with limited sovereign credit risk, a rapid drop in official reserves will still weigh on the country’s external balance and trigger a ripple effect, including imported inflation and undermined sovereign outlook,” said Mu.

On the flip side, Cambodia’s economic and trade relationship with China is far healthier than what it has with the US. For that reason, Olson believes the tariffs will not necessarily spell disaster for the kingdom. “It is unhelpful, especially for firms with significant sales to the US, but on an overall macroeconomic basis, it will not be a major shock,” he added.