2025-03-04
The US and China have entered a new trade conflict where increased tariffs could affect economies around the world. But history shows that such situations often lead to the opening of new trade routes – and Thailand could be one of the countries that benefits.
US raises tariffs – China responds
The US decision to raise tariffs on Chinese goods is partly based on concerns about the increasing spread of fentanyl in the US. However, China and the US already have ongoing cooperation to combat the fentanyl trade. Chinese authorities have previously introduced rules to restrict the export of the chemicals used to manufacture the drug, and both countries have had several diplomatic talks about jointly addressing the problem. US authorities accuse Chinese companies of manufacturing and exporting the chemicals used to produce the dangerous drug. By imposing higher tariffs, the US hopes to pressure China to take action to stop this trade. On March 3, 2025, the US announced that tariffs on Chinese goods would be raised from 10 to 20 percent. In response, China has imposed its own tariffs of up to 15 percent on certain US products, including corn and soybeans. This has created concerns in the market and companies are now starting to look for new partnerships.
What does this mean for Thailand?
When large countries impose trade barriers, businesses and governments look for other ways to buy and sell goods. This is called trade diversion and could lead to countries like Thailand gaining more business opportunities.
1. More export opportunities
As the US now wants to buy fewer goods from China, it may start buying more from other countries. Thailand, which already has a strong industry in electronics, automobile manufacturing and agriculture, could become an important supplier for the US. At the same time, China could start buying more from Thailand, for example food and raw materials.
2. Better trade with Europe
Thailand and the EU are currently negotiating a free trade agreementIf the agreement is finalized, it could mean that Thailand will have better conditions for selling goods to Europe. It could increase trade in products such as technology, green energy and food.
3. Greater cooperation in Asia
Thailand joins the Asian Free Trade Agreement CJPE (Regional Comprehensive Economic Partnership), where 15 countries are working together to reduce trade barriers. If trade with the US and China becomes more uncertain, companies in Thailand may instead focus more on trading within Asia.
Historical examples of trade diversion
In the 1930s, during the Great Depression, the United States implemented one of the most notorious examples of protectionist trade policies by Smoot-Hawley Tariff ActThis legislation had significant consequences for both the US economy and global trade.
Here is an overview of the events and their impact:
- Background:
- The Great Depression that began in 1929 caused mass unemployment and economic unrest in the United States.
- There was strong political pressure to protect domestic industries from foreign competition.
- Smoot-Hawley Tariff Act (1930):
- This law raised tariffs on thousands of imported goods to record levels.
- The goal was to make foreign goods more expensive and thus benefit American producers.
- Consequences:
- Other countries responded by imposing their own high tariffs on American goods, leading to a sharp decline in international trade.
- This exacerbated the global economic downturn and contributed to a vicious cycle of reduced trade and production.
- Many economists believe that the Smoot-Hawley tariffs prolonged and deepened the Great Depression.
- Long-term effects:
- The events of the 1930s taught the countries of the world an important lesson about the dangers of protectionism.
- After World War II, major efforts were made to lower tariffs and promote free trade through agreements such as the GATT (General Agreement on Tariffs and Trade) and later the WTO (World Trade Organization).
In summary, the high tariffs in the United States in the 1930s were an example of how protectionist policies can have negative effects on both domestic and international economies. It underscored the importance of international cooperation and free trade in promoting economic growth and stability.
Conclusion
Although the conflict between the US and China creates uncertainty in the global economy, Thailand can find new opportunities by trading more with other countries. Because Thailand has strong exports and good trade agreements, the country could be one of the winners when trade flows change.
Text: The editorial staff
Image license: forextime.com, Wikimedia, original image