China’s Record Trade Surplus and What It Means for Thailand’s Economy

China’s export machine produced one of the most consequential economic statistics of recent years when it posted a record trade surplus of approximately USD 1.2 trillion for 2025. China’s customs data revealed exports hit USD 3.77 trillion in 2025, up 5.5% year-on-year, while imports remained flat at USD 2.58 trillion, yielding an unprecedented surplus that is equivalent to the GDP of a top-20 economy.

For Thailand — China’s largest trading partner in ASEAN and one of the region’s most export-dependent economies — the implications of that figure are neither straightforwardly good nor unambiguously bad. They are, more precisely, a study in structural tension: a country that benefits from Chinese investment and supply chain integration while simultaneously absorbing the competitive pressure of Chinese overcapacity across sector after sector.

Understanding that tension is not an academic exercise. It is the operating reality for Thai manufacturers, retailers, policymakers, and investors navigating 2026.

The Trade Deficit That Keeps Widening

The bilateral trade picture tells its own story. In 2025, Thailand’s exports to China reached USD 39.72 billion, while imports from China were significantly higher at USD 107.62 billion — a trade deficit that has grown every single year for the past five years.

Thailand’s deficit with China rose 50% in 2025 to USD 67.8 billion — among the steepest annual widening in the region, alongside Malaysia’s 62% jump and Vietnam’s 40% increase. Analysts point to a direct connection: as China has faced elevated US tariffs, its goods have increasingly been redirected toward Southeast Asian markets, raising import volumes across the board.

The contrast with the US trade relationship is stark. Thailand’s total trade with the US reached USD 93.65 billion in 2025, generating a Thai surplus of THB 51.4 billion. Electronics and telecommunications products drove that outperformance, with exports to the US generating a positive trade balance every year of the past five.

Thailand is therefore caught in an increasingly uncomfortable asymmetry: earning from the West what it owes to the East — a structural position that creates both opportunity and vulnerability as the US-China trade war intensifies.

The Factory Closure Crisis

The most visible domestic consequence of China’s export surge is industrial contraction. Thailand’s Kasikorn Research Center estimates that 4,300 Thai factories closed in the two years to 2025, spanning furniture, electronics, garments, automotive, and steel — with the trend expected to worsen.

The automotive sector illustrates the dynamic with particular clarity. Suzuki Motor Thailand announced the closure of its Thai production plant by the end of 2025 due to declining sales and competition from Chinese electric vehicles. Tan Chong Subaru Automotive Thailand ceased car production by 2024 due to ongoing losses, affecting parts suppliers across the ICE component supply chain.

Steel is another pressure point. Capacity utilisation in Thailand’s steel industry fell to approximately 29.3% in early 2024, down from 32.4% the year before. The anti-dumping response has been measured but assertive: Thailand has imposed duties of 31% on hot-rolled coil from China, covering high-strength steel used in critical infrastructure. The Anti-Dumping and Subsidy Review Committee has agreed to additional retaliatory measures targeting 33 product categories, running from October 2025 to October 2030.

The scope of Chinese overcapacity has also expanded significantly. Unlike earlier periods when Chinese excess production was largely restricted to commodities like textiles, steel, and aluminium, overcapacity now extends into food processing, pharmaceuticals, and certain chemical products — products far closer to Thailand’s higher-value manufacturing base.

The EV Paradox: Opportunity and Disruption Simultaneously

No sector better captures the dual nature of China’s economic presence in Thailand than electric vehicles. Thailand has positioned itself as the EV hub of Southeast Asia — and Chinese manufacturers have been central to building that ambition. Yet those same manufacturers are simultaneously displacing the Japanese automotive industry that formed the bedrock of Thailand’s manufacturing economy for four decades.

Chinese automakers held an 82% market share in Thailand’s battery electric vehicle segment as of 2024, with BYD commanding 40% and Hozon Auto and SAIC Motor controlling a combined 35%. Facing that concentration of Chinese and Korean competition, Japanese firms managed to capture less than 1% of the EV market.

By 2026, Chinese companies plan to produce more than one million vehicles in ASEAN countries, with approximately 600,000 expected to be EVs — more than half of China’s entire overseas production capacity. Thailand and the Philippines ranked among China’s largest EV export markets in 2024.

This creates a policy dilemma with no clean resolution. Welcoming Chinese EV investment builds the next-generation automotive sector that Thailand needs. But it also accelerates the hollowing out of the Japanese-anchored supply chains that currently employ hundreds of thousands of Thai workers. The government’s ability to manage that transition — through local content requirements, supplier development programs, and workforce reskilling — will define the long-term terms of the bargain.

The Transshipment Risk

Complicating Thailand’s position further is the growing scrutiny of transshipment — the practice of routing Chinese goods through third countries to avoid US tariffs.

Thailand faces a surge in imports of goods linked to transshipment: items rerouted to bypass US tariffs, or products falsely declared as originating elsewhere. The US has imposed anti-dumping and countervailing duties on solar cells imported from Thailand, Malaysia, Vietnam, and Cambodia, effective April 2025 — with rates set at 375% to 972% for Thai manufacturers. The scale of those duties signals the severity of Washington’s concern and represents a direct threat to Thai solar exporters who are not transshipping but are caught in the regulatory blowback nonetheless.

Thailand’s import content — particularly from China — has risen significantly in recent years, constraining the domestic benefits of incoming investment and increasing the risk of additional US transshipment tariffs going forward.

The Macro Outlook: The Weakest Growth in a Generation

The cumulative effect of these pressures is registering in Thailand’s growth trajectory. The SCB Economic Intelligence Center projects Thailand’s economy to expand by only 1.5% in 2026, down from 2% in 2025 — the lowest growth in three decades outside of crisis periods. The IMF has issued a forecast of 1.6% and the World Bank anticipates approximately 1.7%.

The export sector, which accounts for a substantial share of Thailand’s GDP, faces multiple headwinds: the fading effect of front-loading ahead of US tariffs, rising risks of additional duties on electronics and transshipped products, and intensifying competition from China following its one-year trade agreement with the US to temporarily reduce retaliatory tariffs.

The trade war and slowing external demand from the US will pose risks to Thailand’s manufacturing output and export growth, either directly or indirectly through Thai manufacturers linked to Chinese firms. The Bank of Thailand has cut rates to 1.25% and further easing is expected in 2026, but monetary policy alone cannot address structural competitiveness gaps.

The Policy Response: Necessary but Incomplete

Prime Minister Paetongtarn Shinawatra’s administration has signalled intentions to review import duties and promote local content requirements to shield industries. The NESDC has urged vigilance, noting that while China’s surplus highlights Beijing’s economic resilience, it also underscores the need for ASEAN unity to address trade imbalances.

Experts argue that Thailand’s response must go beyond reactive tariff measures. Bolstering domestic manufacturing through incentives, investing in high-value sectors like electric vehicles, and negotiating fairer trade terms with China are identified as the core pillars of a sustainable strategy. The challenge is sequencing those ambitions against an immediate industrial contraction that is moving faster than policy frameworks can adapt.

China’s record trade surplus is not a problem that Thailand can opt out of. The two economies are too deeply integrated — in supply chains, in investment flows, in tourism, and in digital infrastructure — for Bangkok to meaningfully decouple. What Thailand can do is manage the terms of that integration more deliberately: directing Chinese investment toward sectors that build long-term industrial capability, reinforcing anti-dumping mechanisms against predatory pricing, developing domestic supply chains resilient enough to withstand competitive displacement, and positioning clearly enough in the US trade relationship to avoid the transshipment penalties that would compound an already difficult export environment.

The mixed fortunes embedded in China’s trade surplus are not going away. How Thailand navigates them over the next two to three years will do much to determine whether the country emerges from this period of economic stress with its industrial base intact — or significantly diminished.

Sources: Thailand Business News; Nation Thailand; Kasikorn Research Center; SCB Economic Intelligence Center; Asia Society Policy Institute; Krungsri Research Industry Outlook 2026–2028; Allianz Trade Country Report Thailand; East Asia Institute

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