Shock, chaos and negotiations behind Thailand trading transaction

When US President Donald Trump made a dramatic tariff on April 2, there was no shock anywhere than in Southeast Asia, the region, the whole worldview and the economic model built for export.

In some countries, the deals reached 49%, which came into a number of branches from electronics exporters in Thailand and Vietnam to chips in Malaysia and clothing plants in Cambodia.

“I remember woke up in the morning. It was quite early, and seeing he was standing there on the white house’s lawn. I thought,” I saw it? 36%? How can it be? “Says Richard Khan, whose father founded Hana Microelectronics, one of the largest contracts in Thailand.

Thailand, which has encountered 36%, now has deals, like most neighbors to reduce tariffs to 19%.

Negotiations went to the wire, refined only two days before Trump installed – August 1. It was a rich process of getting there, and there is still very little detail about what was agreed.

ASEAN 10 countries are known to the South -East Asia regional block, exported $ 477 billion (360 billion pounds) to the US.

Not surprisingly, the Vietnam government was the first of the bloc to negotiate with the US, and the first in the region made a deal to reduce the 46% of the rate that Trump imposed on them.

According to the US president, The deal reduces tariffs to 20%, While he claims that Vietnam will now not raise any tariffs for any imports from the US. Typically, the Vietnamese leadership said nothing about this deal.

No details, no written and signed documents, and some reports believe that Vietnam disagrees with the number of Trump. But they installed a bar for other countries in the region.

Indonesia and the Philippines followed the transactions, reducing their tariffs to 19%, although none of the countries depending on exports to the US.

Thailand exports a lot to the US. Last year, they earned it more than $ 63 billion, about a fifth of their total exports. Thailand also had to be at the head of the turn in Washington, asking to reduce the 36% tariff that Trump appointed for it.

But Thailand is not a Vietnam, a one -party communist state, where several leaders can be made critical decisions, little need to worry about the opinions of enterprises and the public.

Most likely, like South Korea and Japan, whose deals came after they moved heavily, despite the fact that they were unwavering US allies, Thailand must also fight domestic policy and public opinion. Thailand also has a weak and moody coalition government, which is subjected to a number of interested interests.

Worse, the decisions that were needed, which were completely unrelated to the trafficking in the United States.

In February, he sent 40 people looking for Uighur asylum, who were stuck in Thailand more than a decade ago to China without giving warnings to US Secretary of State, Mark Rubio. One of the Thai trade officials told the BBC that the negotiating participants were still raising Uighur as a complaint on tariff talks in May.

Then the commander of the regional army filed a complaint against Lèse-Majesté to the American academician, causing him to go to jail and then forced to leave Thailand. So, not at the front, Thailand was in the back of the queue.

The second difficulty facing the Thai trading team is that the US has asked for a decrease in the tariff rate, in particular, access to the Thailand agricultural market, which is strongly protected.

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

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

Three hours away from Bangkok, in Najoka, Worawut Siripun retains 12,000 pigs – an important business in Thailand; Thai eat a lot of pork. He is actively working in the Thai pig association and lobbying for the elimination of tariffs on American pork.

“American farmers produce a much larger scale than we and their costs are lower. Thus, their pork price will be lower, and domestic farmers will not be able to survive.”

Access to the agricultural market was also a noticeable moment in the negotiations with Japan, which sought to protect its rice farmers and still remains one of the main obstacles with India.

In Thailand, it is assumed that the Giants Agribusiness, such as CP, also lobby for US demands to open other sectors such as bird and corn. After each tour, the tariff talks in Washington were conducted by moody meetings and ministers of the Cabinet, the BBC understands.

But on the other hand, Thai manufacturers, which are a much greater contribution to GDP than agriculture. They had a bad deal.

“If we get 36%, then it will be scary for us,” said Superp Vyvpimolkal, Deputy Head of the Director SK Polymer, before the transaction was announced. The company produces a marvelous array of components made of rubber 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 its two brothers in 1991. His history is the story of a modern Thailand that comes from his father’s small family business, but riding on explosive growth of global trade, which became the basis of Thailand’s economy.

They are an integral part of a complex supply chain where their products joins other components from different countries to make consumer, industrial or medical goods for export. About 20% of the company’s revenue comes from the US, but the amount is much higher when the products containing its components. Trump’s tariffs threw a wrench in the work.

“We have small stocks,” Suprep said. He said they could still manage up to 20% or even 25%, reducing costs. When he talked to the BBC, before the transaction announced, he said that uncertainty was the biggest problem: “Please – for our government, just get a deal so we can plan our business.”

20% collection is also delicious for electronics manufacturers, a large branch in Thailand.

“If all of us in the region end up about 20% of our buyers will not look for alternative suppliers – it will be just a tax like VAT, for US consumers,” says Richard Khan, CEO of Hana Microelectronics. The company makes the main components that are included in all in our digital life: printed boards, built -in schemes, RFID tags for pricing.

Mr. Khan says that only about 12% of their products are sent to the US directly, but, like the polymer, the proportion that goes indirectly, within the framework of other produced goods, is much higher. But it is not only concerned with the tariff number.

His concern is the transition, the US accusation is that China avoids tariffs, directing its production through Southeast Asia. According to President Trump, already Vietnam will pay 40% – double the new tariff rate – the goods that the US judges will be overcome.

Both Thailand and Vietnam saw that foreign investments are significantly increased after tariffs have been imposed on China for Trump’s first term, as well as their exports to the US. Some of them were Chinese manufacturing companies; Some were products that use much more Chinese components. And they are not just from China.

Other electronics manufacturer, SVI, robots slid up and down the assembly line, causing hundreds of tiny components to collect boards in cars 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 produces security cameras by ordering amplifiers, medical equipment, to any specifications that their customers, which are mostly in Scandinavia, want. Thailand’s life production sector is part of an extremely complex global supply chain that is almost impossible to rearrange the US president’s demands.

According to WTO rules, the product is considered local, if at least 40% of its cost is added to the local production process, or if it was “significantly converted” to a new product, the iPhone method becomes something else when it is collected.

The Trump administration does not pay attention to the WTO rules, and it is unclear what will be considered trans-sounded, but Mr Khan fears that this can be a greater problem for Thai companies than the standard tariff rate when the US insists on more local components, or less from China.

“South -East Asia is very large on China,” he explains. “China certainly has the largest supply chain for electronics and many other industries, and they are the cheapest.

“We could buy materials from the other part of the world. It would be much more expensive. But for Thailand, Vietnam, or Philippines or Malaysia, a very high threshold would turn out, say, 50-60%made in this country.

At the moment, few details have been identified. Despite the fact that President Trump claims that he has zero interest rates for US goods coming to Philippines and Indonesia, both of these countries have stated that it was wrong and it still needs to be negotiated.

For the Thai government, starting so late and struggling to satisfy the requirements for us, just getting the transaction will be relief.

They will worry about how to make the deal work later, as the details are designed, which usually takes years. And in this they are far from single – rich and developing economies seek to keep up with the Trump tariff policy.

“At one point, it should stop. Of course, it should stop?” Mr Khan says. “The problem is that we do not know what the rules of the game will be, so we all cut, just waiting to learn how to play a new game.”