Thailand’s election gamble stalls US trade talks, reform push

[BANGKOK] Thailand’s political uncertainty has deepened once again, compounding risks to trade talks and economic recovery, after Prime Minister Anutin Charnvirakul on Friday (Dec 12) dissolved parliament upon receiving official approval from Thai King Vajiralongkorn.

The move has pushed Thailand into caretaker-government limbo at a sensitive moment for trade negotiations, including stalled talks with the US, even as border tensions and tariffs weigh on growth prospects.

Later that same day, Anutin took a late-night phone call from US President Donald Trump, underscoring how geopolitics and trade have become increasingly intertwined for Thailand.

Trump was interested in reviving the Thai-Cambodian peace agreement that he had helped broker in Malaysia in October. The two neighbours engaged in a new round of heavy fighting starting Dec 7 that has already claimed dozens of lives and displaced more than half a million people on both sides.

After his phone calls with Anutin and Cambodian Prime Minister Hun Manet, Trump wrote on his Truth Social platform that the two sides had agreed to a ceasefire, a claim that was quickly discredited by an escalation of heavy fighting on the border on Saturday.

“Both countries are ready for peace and continued trade with the United States of America,” Trump wrote.

It is true that both Cambodia and Thailand are keen to continue trading with the US. But political instability and military tensions are complicating those ambitions.

At the tail end of Trump’s conversation with Anutin, the US president indicated that he would give the go-ahead for the US Trade Representative (USTR) to resume US-Thai trade talks with Thailand, which had been paused on Nov 14.

Tying trade and tariffs to geopolitics

The talks were suspended after land mine explosions along the border – allegedly from newly laid mines by the Cambodian military – wounded two Thai soldiers on Nov 10, prompting Anutin to halt peace talks and the USTR to pause trade discussions.

“During the conversation, President Trump said in regard to the trade talks that they should continue at the working level,” Thai Foreign Minister Sihasak Phuangkekeow told a press conference on Saturday.      

Even if talks resume, Thailand’s caretaker status limits what can be agreed.

“Anything we do agree to would need to be approved by parliament under the next government,” said a government source.

That makes a substantive US-Thai trade agreement unlikely before the second half of 2026. Cambodia and Malaysia have already inked trade agreements with the US, while Indonesia and Vietnam are working on theirs.

Under the Thai Constitution, elections must be held within 45 to 60 days of parliament’s dissolution, making Feb 8 the most likely polling date.

While Friday’s dissolution came as a surprise – it was announced only late on Thursday – it had long been anticipated. Anutin and his Bhumjaithai Party have led a minority government since September. This was after reaching an agreement with the People’s Party (PP) – which won the most seats in the last general election in 2023 – that it would support him as long as he limited his term to four months and paved the way for constitutional amendments.  

However, at a meeting on Thursday night, PP decided to proceed with a no-confidence motion after Bhumjaithai voted to uphold the Senate’s veto powers over a constitutional amendment – a move PP viewed as a betrayal of their gentleman’s agreement.

With Anutin’s coalition holding only a minority in parliament, he was expected to lose a censure debate against PP and the Pheu Thai Party, which together command about 300 seats. Dissolution became the least damaging option.

Observers say Bhumjaithai could make headway in the next election, riding on nationalist fervour over the border conflict and Anutin’s strong royalist and military connections.

Economy under pressure

But the political disruption is ill-timed for an economy already under strain. Thailand remains heavily reliant on exports, which account for about 60 per cent of GDP, and on the US market, which made up about 20 per cent of export value in the first 10 months of 2025.

Thailand currently faces a 19 per cent tariff on most exports to the US, a rate that remains vulnerable to political shifts in Washington despite Anutin’s caretaker status.

Dr Thitinan Pongsudhirak, professor of international relations at Chulalongkorn University’s political science faculty, said: “Although Anutin is now running a caretaker government, Trump is unpredictable and could take punitive tariff measures against Thailand for abandoning his peace plan and taking a somewhat belligerent stance on US intervention in the process.”

Anutin rejected both Trump’s ceasefire claim and a ceasefire proposed by Malaysian Prime Minister Anwar Ibrahim, as chair of the Association of Southeast Asian Nations, on Saturday night.

“Thailand will continue to perform military actions until we feel no more harm and threats to our land and people,” Anutin said in a Facebook post. “Respect for friendly nations is important, but Thailand will act according to what is necessary to protect its sovereignty and its people.” 

Thailand has insisted that the border situation and US-Thai trade are separate issues, but Trump has in the past tied tariff rates and trade talks to the issue.

In July, he forced a ceasefire on the threat of keeping Thailand and Cambodia’s tariff rates at 36 per cent, dropping them to 19 per cent only after the ceasefire was agreed to under the guidance of Malaysia’s Anwar.

Meanwhile, Thailand’s caretaker status also precludes the signing of new free trade agreements with other partners, such as the European Union and potentially Canada. These deals are viewed as crucial to reducing reliance on an increasingly unpredictable US market.

Economists are forecasting that the Thai economy will grow about 1.6 per cent next year, as the full year of US tariffs take effect, dragging down Thai exports – still the main engine of economic growth. GDP growth in 2025 is expected to come in at 2.1 per cent.

International tourism, which accounts for 12 per cent of GDP, is expected to drop off dramatically next year unless the border conflict is settled swiftly. Thailand expects about 33 million tourists this year, down from 35 million in 2024. 

The Thai Chamber of Commerce on Friday called for an acceleration of the election process and establishment of a new government to swiftly address Thailand’s urgent economic challenges, including the US-Thai trade talks, the EU-Thai free trade agreement, and passing legislation to enhance Thailand’s competitiveness on the global market.

After the 2023 general election, it took more than three months to bring Pheu Thai’s candidate Srettha Thavisin to the premiership, delaying the drafting of the 2023/24 Budget by several months, and further undermining GDP growth in 2024.

Unresolved structural problems

There is growing recognition of the need for deep reforms to Thailand’s bureaucracy and regulatory framework, which continue to inhibit foreign direct investment and domestic dynamism.

But political instability makes long-term policy planning difficult.

There have been three prime ministers over the past two years – and 10 over the past two decades.

Pavida Pananond, professor of international business at Thammasat University, said the longer-term concern is that Thailand “has been mired in this kind of political upheaval for the past two decades”.

“The domestic navel-gazing has led to a lack of longer-term vision to address the bigger issues that are more structural.”