Storming through Asia last week, US President Donald Trump’s first stop in Kuala Lumpur on Oct 26, before moving on to Japan and South Korea over the next four days, capped by his meeting with Chinese President Xi Jinping before returning to Washington, was the most consequential for Southeast Asian economies.
Brandishing unilateral tariffs set in April as leverage in his weaponisation of the US as the world’s largest export market, Mr Trump succeeded in twisting arms to follow through with his “Make America Great Again” pledge, finalising trade concessions and inducing inbound investments. For Thailand, Mr Trump left behind a “Framework Agreement on Reciprocal Trade” and a “Memorandum of Understanding to Diversify Global Critical Minerals Supply Chains and Promote Investments.”
Mr Trump evidently learned from his last foray in Asia in 2017 — during his first term — when he visited Vietnam and the Philippines. His deliverables back then were limited and less concrete and ended up as a broad geostrategic posture known as the “Free and Open Indo-Pacific,” which was codified in the National Security Strategy and National Defense Strategy by early 2018.
After that, he did not visit Southeast Asia again for Association of Southeast Asian Nations (Asean) summit meetings. This time, he moved and shook up Asean by presiding over the signing of a peace accord between Cambodia and Thailand, whose militaries clashed, starting in July, over a border dispute.
In the Malaysian capital, the signing burnished Mr Trump’s peacemaking credentials and Nobel Peace Prize ambition, while Cambodia and Thailand were incentivised to hammer out trade deals with the Trump team during his visit. Mr Trump used tariff threats and trade demands to effect a peace deal to his preference — trade for peace. Cambodia and Thailand took opportunities from Mr Trump’s plan to finalise agreements — trade from peace.
For Thailand, both the framework and MoU documents have attracted scrutiny and raised eyebrows in Bangkok. Even the staunchly pro-establishment (minority) government of Prime Minister Anutin Charnvirakul of the Bhumjaithai Party is not spared criticism about having given a lot and getting little in return. Had these agreements been made under a government headed by the Shinawatra family and the Pheu Thai Party, or the progressive People’s Party that won the last election, it would have likely led to accusations of selling out the country and even treason. This means that the Anutin government has the best chance to ink these deals in the coming weeks — the US side has indicated Nov 27 (Thanksgiving) as a preferred deadline. While the White House website provides the full texts of both agreements, the reciprocal trade provisions feature Thailand’s elimination of tariffs on roughly 99% of goods, including US industrial and food and agricultural products. Non-tariff barriers, such as acceptance of US-manufactured vehicles approved by US safety and emissions standards and medical devices and pharmaceuticals certified by the US Food and Drug Administration, are also included.
The framework additionally stipulates purchases of ethanol from the US and US Food and Safety and Inspection Service (FSIS)-certified meat and poultry products, while freeing up digital trade and allowing unionisation and promoting labour and workers’ rights. As a sweetener, Thailand also agreed to buy 80 US aircraft worth US$18.8 billion (608.7 billion baht) and energy products, such as liquefied natural gas, crude oil and ethane for another $5.4 billion per year.
While the Thai side was keen to lower the 19% reciprocal tariff, the framework agreement required any exemption to 0% to be conditional on additional Executive Order provisions. In other words, Thailand’s compliance in good faith and wide-ranging concessions were designed to slash the set tariff rate to gain price competitiveness, but this objective will be determined by Washington at a later stage.
Thailand is not alone in making these concessions. Cambodia, Malaysia and Vietnam are in the same boat. The concluded Malaysian-US trade agreement (also available online), in fact, may serve as a benchmark for Southeast Asia’s final trade deals with the US, including Indonesia and the Philippines down the road. Similar to Malaysia, Cambodia finalised a deal with the Trump team that eliminated 100% tariffs on US goods.
For Thailand, the trade framework has become less controversial than the MoU on critical minerals and rare earths. Thailand is not a major producer and player in the rare-earths mix. Its deposits are estimated to be about 4,500 tonnes, a fraction of Vietnam’s 3,500,000 tonnes, Australia’s 5,700,000 tonnes, Brazil’s 21,000,000 tonnes, or China’s 44,000,000 tonnes. Granted, Thailand is a significant processor of rare earths, particularly those imported from Australia. While the US negotiating team included the same rare-earth provisions with other Southeast Asian economies in a strategy to reconfigure supply chains of critical minerals toward the US and away from China, the MoU with Thailand has had adverse repercussions.
The Anutin government, particularly Foreign Minister Sihasak Phuangketkeow, wants Thailand to reappear on the “radar screen” of international affairs — to be a regional player with a role on the global stage again. The MoU on critical minerals was intended to plug Thailand into crucial supply chains, with positive spillovers for innovation and economic upgrading toward electric vehicles, batteries, data centres, green transition, artificial intelligence, and overall climb up in global value chains. For the US, enlisting Thailand and its peer group on critical minerals and rare earths comes with low cost and potentially high yield if supply chains in this key high-tech geoeconomic battleground can become more accessible and secured.
As the dust settles after Mr Trump’s thumping Asia tour, it will not be surprising if partner countries feel a sense of buyer’s remorse — that they may have gone too far in appeasing and accommodating the US president’s tariff threats and trade demands. None of these countries like to be pushed around unilaterally, but they have to go along for the time being owing to their reliance on the US market.
It is likely that during the rest of Mr Trump’s second term, Southeast Asia and elsewhere will aim to diversify and scale back their export exposure in the US market as much as possible. If so, this effort could boost and become a boon for other trade policy platforms that exclude the US, such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Even though they are not directly focused on trade liberalisation, other plurilateral and multilateral forums, such as the Brics+ and Global South, may gain more traction as a “world minus one” alternative in the medium term, as the US under Mr Trump alienates itself from partners and allies.