Early 2026 marked a significant shift in US trade policy after the US Supreme Court ruled on 20 Feb that the Trump administration lacked authority to impose import tariffs under the International Emergency Economic Powers Act (IEEPA). This forced the US government to suspend some tariffs announced in 2025 and switch to using Section 122 of the Trade Act of 1974 to impose a uniform 10% tariff on imports from all countries for 150 days, from 24 Feb to 24 July 2026.
During this period, the US planned to adopt other laws granting longer-term tariff authority than Section 122, particularly Section 301 of the Trade Act of 1974. Section 301 allows for reciprocal tariffs after investigating unfair trade practices by partner countries. Investigations began on 11-12 March focusing on two issues: 1) Structural Excess Capacity and 2) Forced Labor.
On 2 June, the US government announced Section 301 tariff guidelines addressing forced labor with 60 partner countries, setting tariffs between 10% and 12.5% in two groups: 1) 12.5% for countries without measures banning imports of forced labor goods, including Thailand, and 2) 10% for countries with such measures but limited or ineffective enforcement. Countries with an Agreement on Reciprocal Trade (ART) with the US, such as Malaysia, Cambodia, Taiwan, and Indonesia, are likely to receive lower tariff rates.
This announcement is preliminary; the USTR is allowing partner countries to provide comments and negotiate. Partner countries can submit feedback by 6 July, with a public hearing scheduled for 7 July.
SCB EIC expects the US government to finalize Section 301 tariff rates on forced labor before 24 July, replacing the temporary 10% tariffs under Section 122 that expire on that date.
Thailand risks being assigned a 12.5% Section 301 tariff on forced labor grounds, as the USTR considers Thailand lacks clear legal measures banning imports of goods produced by forced labor and cannot enforce such measures effectively. SCB EIC assesses three implications for Thai exports.
Although Thailand can submit explanations and proposals to negotiate Section 301 tariff reductions with the US, significant tariff cuts are unlikely since Thailand may not quickly amend forced labor laws and has not reached an ART agreement with the US. This aligns with the Thai Ministry of Commerce's push to accelerate ART negotiations to preserve export competitiveness in the US market.
Looking ahead, Thailand's international trade faces uncertainties from US trade policies depending on two key factors:
1. Thailand may need to open its domestic market more to US products through ART.
Thailand has incentives to expedite ART negotiations with the US, as countries with ART agreements tend to receive lower tariff rates and reduced trade policy uncertainty. This helps Thailand avoid disadvantages against regional competitors, attract foreign investment, and lower raw material costs, enhancing industrial competitiveness.
However, signing ART may involve economic costs. For example, Indonesia's ART signed in Feb 2026 shows tariff benefits come with opening 99% of its market to US imports, reducing trade barriers, increasing imports of US goods and services, and enhancing cooperation on supply chains, export controls, and investment screening aligned with US security standards.
Thus, while ART may preserve Thai export competitiveness in the US market, it could increase pressure on domestic producers, especially in agriculture, which has long been protected. Furthermore, opening markets and increasing US imports might exacerbate Thailand's persistent trade deficit this year.
2. US Section 301 import tariffs related to Structural Excess Capacity.
Thailand risks additional tariffs on this issue, as it is among 16 countries under US investigation for Structural Excess Capacity under Section 301. The US notes 1) Thailand's trade surplus with the US grew rapidly from $46 billion in 2024 to $51 billion in 2025, with surpluses in key industries like automobiles, machinery, and rubber, and 2) Thailand's manufacturing sector has significant excess capacity, with utilization rates below 60% for two consecutive years, and only about one-third of industries recovering to pre-COVID-19 levels, despite rising exports to the US.
Going forward, Thai exports face downside risks from potential increases in average effective tariff rates due to additional Section 301 tariffs on Structural Excess Capacity, which would be imposed on top of forced labor tariffs. Thailand would be one of only 16 countries facing potentially higher tariffs than many competitors (who number 60 for forced labor tariffs), risking loss of competitiveness in the US market. However, the impact depends on the final tariff rates, timing, and exemptions the US ultimately applies.
Thai businesses should diversify markets to mitigate uncertainties from US trade policies while enhancing competitiveness. The government should accelerate FTAs with large, high-potential partners alongside close US trade negotiations to reduce future tariff risks. If ART negotiations are necessary, the government should prioritize appropriate transition mechanisms, such as phased market openings, import quotas, or support measures for sensitive sectors, enabling Thai producers to adapt and remain competitive globally.
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