US President Donald Trump's tariff policy is likely to make China even stronger and clarify the trend of manufacturing base relocation from China to other countries, including Thailand, says Sompop Manarungsan, president of the Panyapiwat Institute of Management.
The specialist on the Chinese and US economies warned the Thai government not to rush into agreements with the US, urging a thorough consideration of the broader impact.
According to Mr Sompop, curbing China is one of Trump's goals, but his main objective is to bring an industrial manufacturing base back to the US, using re-shoring and on-shoring policies.
"Trump's measures are expected to make China even stronger in the long run because China has more choices than the US," he said. "Last year, China's population of 1.4 billion had a domestic retail market value of US$6.9 trillion. In comparison, exports to the US amounted to around $500 billion, which is less than a month's worth of domestic consumption in China. Moreover, exports to the US account for less than 3% of China's GDP."
In the short term, Mr Sompop said China would accelerate domestic consumption to absorb the impact from a potential loss in exports to the US. However, he said it is unlikely exports to the US will disappear.
Even if the value of exports to the US is halved to $250 billion, this equates to half a month's domestic consumption in China, said Mr Sompop.
To address the issue of cheap Chinese goods flooding foreign markets, China will likely relocate its manufacturing bases to produce goods that replace imports in those countries -- known as import substitution industries. These are goods deemed necessary for import by these countries.
By establishing production bases locally, China avoids dumping accusations and can export those locally manufactured products to other countries, especially in the Global South and parts of the Global North, he said.
The Global North consists of much of the world's developed countries, whereas the Global South consists of the world's developing countries or least developed countries.
Mr Sompop said these import substitution industries will use Chinese investment to spring up across the world, helping China to gain more market share in the Global South.
The US has a population of 340 million and higher production costs than China, which means it will struggle to compete in terms of exports. This puts the US at a disadvantage over the long term, he said.
Mr Sompop described Trump's policies as "going against the tide", as the US economy should be focusing on a service-based and finance-based economy, where its core strengths lie.
Developing countries should continue to be natural resource-based and production-based economies. However, with these tariffs the US is trying to do everything itself, including bringing back production of steel, aluminium, energy and copper, which is unrealistic, he said.
In the long run, this will only isolate the US further, said Mr Sompop.
"This policy reversal goes completely against economic rationality," he said.
Mr Sompop also pointed out other economic weaknesses of the US, including the US stock market being valued at 2-3 times the country's GDP. When the stock market declines, it affects consumer spending, which accounts for 70% of US GDP.
When consumer spending is affected, it has a ripple effect on the service sector, which is a major part of the US economy, he said.
These impacts could trigger political unrest, said Mr Sompop, noting that millions have recently marched in protest.
"Although the negative effects of current policies haven't fully emerged, within 3-6 months they will likely become more apparent," he said.
Mr Sompop said when domestic consumption is hurt by rising prices, inflation in the US will increase, making it unlikely the Federal Reserve will cut interest rates. If the Fed has to raise rates to combat inflation, this will immediately impact the stock market.
Regarding Thailand, he said among the country's top 15 export items, more than 10 are produced by foreign investors, such as mobile phones, electronics, and semiconductors, largely hailing from the US, Japan, South Korea and Taiwan.
This means the companies most affected by US tariffs will be foreign investors in Thailand. As for Thai-origin goods among the top 15, there are only three: jewellery, pet food and rice.
"Rushing to open the market to US goods -- especially agricultural and livestock products -- could lead to protests from farmers. It could be perceived as trading off the agricultural sector in exchange for mobile phones or electronics," said Mr Sompop.