The trade war between the United States and China that began in 2018 has significantly altered trade relations, particularly with the trade between the U.S. and China decreasing, as U.S. imports from China dropped from 21.84% in 2017 (before the trade war) to 18.39% in 2018 while China's imports from the U.S. fell from 8.41% in 2017 to 5.95% in 2018

This issue has had a ripple effect on other countries, including Thailand, which is part of China's production chain. This is evident from the declining demand for Thai products from China and countries within China's supply chain, such as Hong Kong, Taiwan, and South Korea, which has been clearly shrinking since the last quarter of 2018, coinciding with the implementation of most U.S. and Chinese measures.

       The Office of Trade Policy and Strategy (OTPS) revealed that since the onset of the trade war, Thai exports to the U.S. have continuously expanded, growing by 5.5% in 2018, 11.8% in 2019, and 2.5% in the first half of 2020. During the first half of 2020, exports from Thailand to China and countries in China's production chain, such as Hong Kong, also resumed growth at 5.8% and 1.4%, respectively, indicating that the impact of the trade war has lessened and businesses are beginning to adapt more effectively.

       Data shows that Thailand has adapted well to the trade war and has seized the opportunity to become a substitute exporter for both the U.S. and China, leading to an increase in the market share of Thai products. Moreover, U.S. and Chinese investors are showing increased interest in investing in Thailand.

As the U.S. and China need to restructure their trade and seek new sources of imports, Thailand has gained opportunities from trade diversion, allowing for greater exports of substitute goods, thus increasing Thailand's market share in both the U.S. and China. In 2018, Thailand's market share in the U.S. rose from 1.26% to 1.34% in 2019, and to 1.63% in the first half of 2020.

Meanwhile, in 2018, Thailand's market share in China increased from 2.13% to 2.23% in 2019, and further to 2.42% in the first six months of 2020.

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       The trade war has also led to various forms of investment diversion, with Thailand attracting more interest from foreign investors, including those from the U.S. and China. This is reflected in the value of foreign investment promotion applications in Thailand, which has nearly doubled compared to the period before the trade war.

       Before the trade war (in 2017), the value of investment promotion applications was approximately 280 billion baht, while after the trade war (in 2018 and 2019), the value ranged from approximately 510 to 540 billion baht per year. Notably, the U.S. was the largest applicant for investment promotion in 2018 (accounting for 57% of all foreign investment promotion applications), while China was the largest applicant in 2019 (accounting for 52% of all foreign investment promotion applications).

       The trend of investment relocation has also supported Thai exports. Although the value is still not significant, there is a noticeable trend of many foreign companies using Thailand as a production and export base since 2018, compared to previously not exporting at all or experiencing a decline in exports.

       Therefore, the ongoing conflict between the superpowers presents an opportunity for Thailand to attract investment funds to enhance Thailand's trade capabilities in the future, both from U.S. and Chinese investors, as well as investors from other countries who are likely to continue investing in various countries in the Southeast Asian region, including Thailand, after the COVID-19 situation stabilizes.

 

Source: Ministry of Commerce