Worawut Siripun, a progressive smallholder pig farmer from Nakhon Nayok, fights an uphill fight every day as he raises a herd of 12,000 pigs. Compounding his challenges, his farm is three hours from Bangkok. Thailand’s pig farming industry plays a vital role in the nation’s economy, fueled by a high domestic demand for pork. When it comes to despair, Siripun is not alone. He can hardly compete with US farmers who raise hogs on agro-industrial scales and produce them much more cheaply.
The Thai economy is in deep trouble. This upheaval follows closely after the United States slapped an incredible 36% tariff on Thai imports. Typically, the proposal for such a tariff was met with outrage and condemnation from local business leaders and politicians of all stripes. Richard Han, CEO of Hana Microelectronics, described the levy as a “shock” to the industry. In her testimony, however, Suparp Suwanpimolkul, deputy managing director of SK Polymer, called this high tariff “devastating” for his firm.
Thailand’s manufacturing sector significantly contributes to the country’s GDP, far surpassing the agricultural sector in economic impact. In the last round of negotiations, Thailand was able to negotiate that tariff down to 19 percent. This positive development, applauded by many stakeholders, has not relieved all the worries. The agricultural market is still largely off-limits, forming the most complicated obstacle in the continuing trade talks with the US.
New acting Prime Minister Phumtham Wechayachai has now taken over the government after the last PM resigned amid an apparent scandal of cronyism. He’s under immediate pressure to calm trade relations with the US. This reassurance, coupled with the much anticipated reduction in tariffs, further marks a significant step forward. Now the question is how sustainable this agreement will prove to be over time.
Worawut Siripun’s situation represents the complexities that Thai farmers are currently dealing with. He pointed to one key benefit for US agricultural producers. Simply put, they can raise pork more productive, at a greater scale and more efficiently. US farmers grow at a far greater efficiency than us, with lower costs of production. As a result, the price of their pork will drop, and our domestic farmers can’t compete and will go out of business,” he said.
Richard Han figured that’s because only about 12% of his goods even get exported through his products’ ports of call to US customers directly. He added that the knock-on effect on his business would be huge. What he really raised the alarm about was the potential shift in consumer decisions that could result from the tariff changes in America.
“If all of us in this region end up with around 20% our buyers won’t seek alternative suppliers – it will just be a tax, like VAT, for US consumers.” – Richard Han
The ambiguity of trade policy has kept many in a state of limbo. Han lamented the unpredictability of the situation: “The trouble is, we don’t know what the rules of the game are going to be, so we’re all milling around, just waiting to find out how to play the new game.”
Suparp echoed this sentiment and pleaded with government officials to finalize trade agreements swiftly: “Please – to our government, just get the deal, so we can plan our business.” His business, SK Polymer, is focused on manufacturing the rubber goods for export, highlighting just how integrated Thailand’s manufacturing sector is with the global economy.
The recent tariff discussions have brought to light the intricacies of global trade relations and their impact on local economies. Due to the very intricate web of supply chains, sudden policy shifts can create waves through countless industries well beyond the obvious targets.
Looking to Thailand’s farmers and industrialists, the mood is one of guarded but real hope. They’re all optimistic despite a hard road ahead. The removal of these tariffs is a significant and welcome relief. That’s still too short to remove the competitive disadvantage that local businesses face versus their US counterparts.
“At some point this has to stop. Surely it has to stop?” – Richard Han