Thailand: An economy on hold?
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Hi there, I'm Ed Butler. Welcome to Business Daily here on the BBC World Service, where today I'm in Bangkok in Thailand, enjoying the fruits, quite literally, of this Southeast Asian region. You want to try? Yes, please. This one is more sweet. Oh, that is sweet.

Well, actually, I'm in Thailand not just to eat all kinds of lovely mangosteens and rambutans, but as part of a series of Business Daily programmes looking at various aspects of this Southeast Asian region. As countries here try to navigate a turbulent time for global trade, is it time to reassess relationships with the US and nearby China?

Yes, Southeast Asia is potentially facing some of the highest tariffs from Donald Trump's White House of any region in the world. And given its dependence on export income, that could spell seriously bad news here.

There seems to be no solution for them other than very significant monetary stimulus to boost demand growth. The pressures that the companies are facing, it's a really bad place for them to be in. Southeast Asia's brave new world. That's all to come in Business Daily. But first, back to my fruit market. Ayura Market is like one of the biggest international fresh market in Thailand.

This, by the way, is Christine Pecheralamp. She's an agricultural export consultant. It goes on as far as I can see. To my right, watermelons. Hundreds and hundreds and hundreds of watermelons, some of them cut beautifully open. I'm going to take a photo of that later. It's very impressive. And now we're stepping in now to the main market area. More watermelons. This is the watermelon area, right? Yes, we have many areas.

Durian, mango, chine, or lambutin. The man is opening a large styrofoam box and reaching in for these bags of cut fruit here. Wow. How is it? It's almost like meat, isn't it? Yes. Strong flavour. Yes. It's very delicious. The best one in Thailand, this variety. Thank you.

Most buyers or importers, they are from like Middle East and India. They like a lot. But it's here everywhere in the world.

Is business going up for you? Business is going up. She's pointing to the sky. Things are good. Well, that's the good news for Thailand. Many of its agricultural exports are booming, and not just fruit. Thailand is the world's biggest rubber exporter, second largest rice exporter, and third biggest sugar exporter. But for many ordinary Thais who are not involved in these growth sectors...

Things now are feeling a lot less certain. Wandering through this village, Ban Poo Yuan, which is about 100km maybe north of central Bangkok. It's a rural area and it's very poor. Every house next to me seems to be loaded high with junk in their courtyards, just stuff that they're gathering, scrap metal, bits of wood for recycling. People around here are either...

construction workers, I'm hold day laborers or they work in the army in the local base.

Along with my fixer, Mao, I've just bumped into a strikingly cheery young man who calls himself Ball. He's sitting bare-chested on the back of a moped, squinting at me through ill-fitting glasses. He's clutching two cigarettes and a 20 cents pack of noodles. That's all that he's got the money to buy today. What are you doing? I'm driving a motorcycle.

Oh, he's driving that car for backhoe digging. So he's a driver for one of the construction companies. I don't know. I haven't done any work. I haven't done any work since I got here.

People around here do daily construction. It's a day rate, so whenever they work, you get paid. But you can go for a long time, sometimes with no work at all? Sometimes they don't have work. The economy is not very good. Everything is increased, it's more expensive. But the labor rate, the day rate, they're still the same. What's your dream? I want to have my own car.

My dream is to have a job going that I can have some work and get money. A regular job? A regular job, that's correct. So what do people do when they run out of money around here? I don't know. I don't know.

Then I just have to go to somewhere to find rice. Try to get a formal lending from government bank as well. They say that I cannot get any formal loan unless we go to Indian Hindi to lending the money. So you go to a loan shark, basically a private money lender. Are most people in debt, do you think? They say this is a loan shark. I don't have any. You don't have any?

He's shouting out to his friends, are you in debt? Are you in debt? And they're all shouting, yep. They're all shouting yes. Actually, they say, who's not?

Who's not? The view from the street. Well, the figure suggests that with its dependence on tourist revenue, Thailand has struggled more than some of its Southeast Asian neighbours to bounce back from the economic shock of the COVID pandemic. I think the whole country got struck in COVID. Thailand supported coming back, but it's not likely. It hasn't been easy. It hasn't been easy.

That's Danakorn Kasetsuan. He's chairman of Thailand's National Shippers Council. He says that if the challenge of escaping Covid was tough, the economic headwinds now are equally daunting.

My fellow Americans, this is Liberation Day. Waiting for a long time. Going to make it wealthy, good and wealthy. In April, President Donald Trump announced his plan to impose a raft of tariffs on all of America's global trading partners, reserving some of the highest rates for countries with the highest trade surpluses. That meant Southeast Asia was going to be hit hard. Here's Danicorn Cassetz-Royan again.

I think that the last six months, the rate of export declined dramatically. Not only Thailand, I mean, I think the whole Asia, we're going to face that situation. Cannot avoid. And chaos or not, it will cause some kind of trouble. Uncertainty not only hurt us, but hurt the whole supply chain. People just say, stay home. Why buy clothes? Why buy stuff? Hold on to your money. Don't spend.

I think it's already happened. You're listening to Business Daily on the BBC World Service with me, Ed Butler, in Thailand.

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Well, for now, US tariffs have been held at just 10%. It's a manageable number. But in just a couple of weeks, according to President Trump's timetable, those could rise once again, unless a compromise deal is struck. Malaysia faces a potential 24% rate. Thailand's could reach 36%.

We'll be talking in more detail about the threat of these tax rates in tomorrow's edition of Business Daily. But it's important to note that the trade tensions already represent a measurable economic challenge. That's the sound of silence.

I'm standing in one of Thailand's biggest deep-sea water ports. There are several docking points here for huge container ships, the kind that you see travelling the world, the world's oceans, taking products back and forth.

Many of them come from here. Thailand exports hundreds of billions of dollars worth of goods from cars to pharmaceuticals, food products. All of it comes from places like this. But listen to this. Yeah, it's very, very quiet here. There are only a couple of ships I can see stowed at anchor. The cranes are all virtually idle. Everything's on hold. On your left is Burak.

Rayong Kitapol is driving me around his industrial park, a massive free trade area south of Bangkok, a facility built a few years ago to welcome foreign firms, offering them low corporation taxes and relatively cheap skilled labour. What's this in front of us?

So you're still expanding? But I think the show must go on.

The show must go on, but how much has the last two months changed the mood, changed the atmosphere? Oh, yeah, it's less activity, definitely. Yeah, everybody in the mode of wait and see. Some aren't even waiting. Rayong shows me the site of one of his main former Chinese clients, a solar panel maker called Standard Energy that's already mothballed its operations in the wake of the US tariff threat.

They close down and wait to see that Thai government can deal with United States. Otherwise, they're leaving Thailand altogether? Correct, yes. That kind of move must be pretty scary. I mean, 80% of your customers, right, the companies that are investing here, are Chinese or are Chinese-owned? Yes, 80% of the foreign direct investment from China is

Most of them export to the United States. We just hope that all of these tariffs can be reduced in terms of not so aggressive that will not only affect Thailand, but many other countries that rely on export. But I still believe that there's a room, definitely, for Thailand and the United States to do the trade.

Rayon Kitapol. Well, I did approach Standard Energy itself for comment on this. They didn't reply to my emails, nor did any other Chinese firms operating in Thailand. But this apparent downturn does point to what was already a wider trend. Danakorn Kasetswaran of the Shippers' Council says that years of trade tensions between Washington and Beijing have prompted Chinese firms to start pumping money and goods into Southeast Asia instead.

on an unprecedented scale. In one way, we like it, OK, that they have come and helped to put some direct investment. But in the other hand, I think that we were not prepared good enough. China take this opportunity to use the non-Thai-liberate that Thailand has to put the best production and export to US countries.

They call this transshipment, don't they? This is where Chinese companies will define themselves or identify as Thai companies effectively so that they can sell to the US market without the tariffs or the penalties that Chinese companies normally face. Has there been a lot of that in Thailand in the last two or three years? I would say quite a bit. I think this is the rule of thumb. And of course, it's not good for Thailand.

Has there been an issue in Thailand that with this extra pressure on China, Chinese products are being thrown into the Thai market at a reduced price? In other words, you're getting swamped with Chinese products because China can't sell them to America anymore. Of course. I think that is the target market for China product to move away from.

Now Thailand got the big, big deficit compared to the export volume that we have exported to China, big time. And it's getting worse. I would say that it could get worse. The whole ASEAN will face the same issue that China is able to export into our country without TALIF. This is really a strong wake-up call, big call, big wake-up call that we need to look for the new market.

We have no choice. Danakorn Kasetsarawan. Well, while they're looking, the Thai government is also announcing urgent stimulus measures to protect its firms against what it fears may be some rocky months ahead. Menishi Ray Chowdhury is CEO of Emir Capital Partners, an investment firm that advises companies on the Southeast Asian region.

The Chinese are investing close to about 15 to 20 percent of their total external foreign direct investment in the ASEAN region. Chinese exports to ASEAN are actually now higher than their exports to U.S. or Europe.

And I think that's the reason why the United States put up such high tariffs on some of the Southeast Asian countries. They're being told that, OK, if you don't stop transshipment, your own exports would also come under pressure. And what about the problem, certainly, that people have told me about, that Chinese goods are now coming to a far larger volume into the local market as well? In other words, the market is being flooded in some areas, at least locally,

Absolutely. You know, this is perhaps the most important hurdle to economic growth that that entire region might face. Now, as that transshipment route comes under pressure from US and Europe,

China is trying and would continue to try to address the domestic consumers in Malaysia, Indonesia, Thailand and so on. And that is a big problem for these countries because their companies face increasing pressure, margin pressure. We are already seeing on an average about 100 companies per month closing down in Thailand and these come from a wide area.

of engineering, manufacturing, auto components, and so on. And we haven't even talked about the potential deflation problem. If I'm convinced that prices are going to go down, I would hold back my investments and consumption today. And this creates kind of an unending downward spiral. Today, China is in deflation. So is Thailand.

Countries like Malaysia or Indonesia are rapidly hurtling down. So these economies are between a rock and a hard place. Their domestic consumption is not really that big, which can absorb an onslaught of Chinese goods into their markets. At the same time, because China is the big neighbor in this region,

They have to maintain good geopolitical relations and it's a really bad place for them to be in. Manishi Ray Chowdhury. And as mentioned, we will be looking in more detail at Thailand's and Malaysia's trade conundrums in tomorrow's edition of Business Daily. But for the last word now, I'm going to leave you with a final plea from the chairman of Thailand's shippers council aimed directly at the US president.

If the whole consuming market consumes less, less and less because of this panic, what would be good for the world? The world would not grow. Then what happens? It doesn't need to be that way. People want to see a better life, a better dream, a better hope. And if being the leader of the world, I need to ask President Trump to help.

help us to settle this faster, quicker. At least we know what could happen.

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