Laos' Tariff Burden

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On April 2, 2025, President Donald Trump announced reciprocal tariffs on all trading partners. Some countries were hit harder than others – like Laos, a landlocked country with one of the smallest economies in the world. The announcement, dubbed 'Liberation Day', set a baseline rate of 10%, along with an increment ranging up to 50% or more. Reactions from many of America’s traditional and strongest trading partners, along with impacts on their economies, dominated the news and think tank studies. Yet, few shed light on Laos’ condition.      

Compared to other nations, Laos received minimal attention on the subject of tariffs, which is on account of its small economic footprint. In Southeast Asia, Vietnam, Malaysia, Singapore, and Thailand dominate trade with the U.S., while Laos has almost the least out of all nations. The U.S. imposed a 48% tariff rate on Laos on April 2, subsequently lowering it to 40% on July 7. As of August 7, the rate remained at 40%. This op-ed will look at some of the initial and forecasted impacts of the reciprocal tariffs on Laos, and official and local reactions from the Lao People’s Democratic Republic (LPDR).

A short history lesson: Laos, from its first beginnings in the 14^th century, has been surrounded by larger powers like the Siamese, Vietnamese, and Khmer kingdoms. The country often got caught in the middle of major power struggles and was eventually colonised by the French. Into the 20^th century, Laos became entangled in the Cold War, and was already engaged in its own civil war at the time. When the Lao People’s Democratic Republic (LPDR) established communist rule in 1975, despite not completely cutting off relations, the U.S. kept a certain distance from Vientiane. Today, Laos is considered one of the poorest countries in the world. 

Among Southeast Asian nations, U.S.-Lao trade is small. In 2024, U.S. goods trade with Laos totalled an estimated $844 million.  

• U.S. goods exports to Laos were $40.4 million 

• U.S. goods imports from Laos totalled $803.3 million      

• The U.S. goods trade deficit with Laos was $762.9 million      

Now, compare these numbers to the stronger economies in Southeast Asia from 2024 in terms of U.S. imports. 

• U.S. goods imports from Vietnam totalled $136.6 billion 

• U.S. goods imports from Malaysia totalled $52.5 billion 

• U.S. goods imports from Singapore totalled $43.2 billion 

• U.S. goods imports from Thailand totalled $63.3 billion 

U.S.-Lao trade is characterised by cheap goods and processed technology going to the U.S. and food, medical supplies, and infrastructure components heading to Laos. Specifically, Laos sells shoes, wood furniture, semiconductor devices, and optical fibre to the United States. The United States exports parts for manufacturing and infrastructure, starch for industrial use, and various foods like cereal, oil seed, and beverages. In terms of ranking, Laos is number 86 among U.S.’ top trading partners when looking from June 2024 to May 2025, where last year at the same period, it was number 126. It is safe to say that U.S.-Laos trade is minimal.

Most of the foreign direct investment (FDI) in Laos comes from China, Thailand, and Vietnam, with the U.S. giving mainly foreign assistance, which is now up-in-the-air due to the dissolution of USAID. From 2001 to 2025, the U.S. government gave $56 million in foreign aid. As of 2023, most of U.S. aid went – in descending dollar amounts – to military financing, the disability sector, public financial management, unexploded ordinances removal, and education. 

On the surface, the 40% tariff may not have that significant of an impact because Laos has minimal trade with the United States, but further inspection yields a bleak forecast. The White House derived the tariff percentage for each country’s trade deficit, which for Laos was $762.9 million in 2024. Trump saw this imbalance as unfair. In terms of projections, U.S. tariffs on Laos will negatively impact all sectors of the country. Small and medium-sized enterprises (SMEs), which make up most of the businesses in Laos, will be hit the hardest. Other industries like agriculture, textiles, and light manufacturing industries that primarily export to the United States now risk going out of business. According to the Vientiane Times on July 14, SMEs account for ‘approximately 99% of all formally registered firms and contribute 94% of formal sector employment'. As such, there will be massive job loss from the tariffs. Additionally, The Laotian Times cited Laos’ burgeoning coffee arabica industry as another sector that will suffer by losing out to competitors due to the increased price of its product.     

Even Chinese companies based in Laos will feel the sting. Several Chinese solar panel manufacturers set up shop in the country to skirt around U.S. tariffs. Others sent their products to Laos to be assembled, and then sold to the U.S. and other countries – also known as transshipping. So far Laos has avoided an additional tariff rate for transshipping, unlike Vietnam, which has a 40% tax on transshipped goods.

In addition, economic fluctuations in neighbouring countries will have a big effect on the country. Vientiane Times journalist Souksakhone Vaenkeo wrote, ‘Tariffs imposed by the United States on goods imported from Laos and other trading partners are projected to have a significant impact on Laos’ economy in 2025 and 2026, economists have warned'. In the first round of tariffs in April, the U.S. set high tariffs on the European Union (20%), Thailand (36%), Vietnam (46%), and China (145%), all crucial trading partners with Laos. For the second round on July 7, rates changed with Thailand at 36%, Vietnam 20%, EU at 15%, and China still under negotiation. Here are the numbers for 2024 trade between these nations/multi-national group and Laos: 

• EU exports to Laos were 147 million EUR and imports were $488.08 million 

• Thailand exports to Laos were $4.93 billion and imports at $3.36 billion 

• Vietnam’s exports were $117 million and imports from Laos were $173 million 

• China exports to Laos were 3.68 billion and imports from Laos were $4.56 billion 

The National Economic and Social Science Institute, a British-based research group, stated that ‘declining economic growth in these countries will affect their demand for goods imported from the Lao PDR as well as FDI inflow and tourist arrivals into Laos'. In 2024, export trade to Thailand, Vietnam, and China totalled $8.176 billion, 82.4% of Laos’ total exports. Three-fourths of what Laos sells will be hit on top of its own 40% rate.

There was little noise from the Lao government after the April 2 tariff declaration. On April 7, Prime Minister Sonexay Siphandone sent an official letter to the U.S. president. According to one source, in the letter, the ‘Lao government highlighted the differences [in trade calculations] and proposed that negotiations be carried out by both countries’ trade agencies to establish common ground’. One of the main arguments was, ‘The U.S. still needs to import these goods from the Lao PDR or other developing countries because the production cost of these goods in the U.S. is high’. American businesses would incur high costs if they tried to produce the same goods Laos exports. Vientiane also had an issue with how the White House calculated the tariff rate for Laos. The Lao government argues that ‘there is a huge discrepancy in the trade figures. The U.S. cites a trade deficit of over $762 million in 2024, while statistics from the Lao Ministry of Industry and Commerce show a trade surplus of just over $42 million'. Outside of the letter, the government did not issue many public statements. It would have a difficult time lifting the country out of the 'least developed country' status.

The public sphere was relatively quiet and only limited to those who had a stake in the economy, including those who were affected by trade affairs. Lao citizens in export businesses worried about losing their jobs, but the complaints never escalated into street protests.     

After the July 7 tariff updates, there was still little news from the Lao government. Yet, the Lao people took to social media to express their thoughts. On Tholakhong’s Facebook page, affiliated with Lao PDR and an important news agency sharing information from government sources, on July 7, there was a wide range of response posts (in Lao). One negative comment stated, ‘Trump, you know that Laos is a small country with a low economic growth rate and is not yet very high. You should be more generous and reduce tariffs more than this. I would be very grateful to you. For a country with a strong economy, you typically pay fewer tariffs. It is not fair for Laos. I hope you will reconsider'. An ambivalent one reads, ‘I don't have money to buy your stuff anyway, so increase or decrease tariffs as you want, you crazy power-hungry bastard’ or ‘What does it matter? We don't export anything anyway'. One person saw that China might be the actual target, ‘It seems like these tariffs are really against the Chinese factories that have set up in Laos to export to the U.S’.     

Several days later, from July 15-16, the Lao government held a meeting to discuss major national issues, with tariffs being one of them. On social media, some netizens were critical of the lack of official response, with one response saying, ‘All you do is meet and nothing else’ (comment has since been deleted). The majority of the government meetings focused on rebuilding roads and floods from recent rains. A highlight of the meeting was the 2025 Mekong-Lancang Special Fund Cooperation Agreement with China, covering ‘human resource development, agriculture, water resource management, health, and poverty reduction, targeting both central and local levels'. There was little news coverage and public information on government conversations about the tariffs.

On July 17, Laos came under more U.S. tariff pressures, but not from the White House. A group of U.S. solar panel manufacturers from the Alliance for American Solar Manufacturing and Trade lobbied the U.S. Department of Commerce ‘to impose new tariffs on solar imports from Laos, Indonesia, and India…'. The Laotian Times said, ‘the group allege[d]’ that ‘foreign competitors…are benefitting from government subsidies and dumping products at below-market prices'. Furthermore, news articles have cited the U.S. group saying that Chinese and Indian companies have set up shop in Southeast Asia, or transshipped through the region to skirt U.S. tariffs. The American-based solar panel industry has been gaining momentum since the 2022 Inflation Reduction Act, which provided tax credits to diversify producers. The U.S. c-Si solar cell imported 778.25 megawatts in 2024 from Laos, the fifth largest behind Vietnam, Thailand, South Korea, and Malaysia. The U.S. Department of Commerce has recently opened an investigation on the solar panel industries located in India, Indonesia, and Laos. It is looking to see if Chinese parts are being assembled in Laos to bypass tariffs. If the department finds tariff violations, the U.S. could add another levy on solar panels from the country. 

Since the August 7 tariff deadline, little has changed for Laos. Regardless, there are some small bright spots. Laos’ current rate of 40% is slightly lower than the original 48%. Main trading partners of the country also fared better than the first declaration of rates: negotiations are still taking place with China and the European Union, Thailand is at 19%, and Vietnam 20%. There will still be some impact on trade and foreign direct investment to Laos, but not as large as projected.

On social media (comments on the Facebook pages of Lao news agencies do not stay up for long but get deleted if they are negative), again, there were mixed reactions. From The Laotian Times Facebook page on July 31, there was a post about the August 7 tariff deadline. One person wrote, ‘Laos has to explore and depend on its friendlier countries… It is more likely for Laos to move much closer to its traditional, friendly nations in the west, rather than to the west, for the sake of economic survival’.      

There are still questions of why Laos received such a large tariff rate. As described earlier, several much larger nations that have substantially more trade with the U.S. received reduced tariffs rates. Even though Laos’ rate was lowered by a few percentage points, it is still double or more than many of its neighbours. One way of explaining the limited tariff cut is that Washington will not be impacted as much by hitting Laos with a 40% tariff than if it had dealt the same percentage range on Thailand, Vietnam, or China. Another answer is, Laos has no leverage at the negotiating table. It has little choice but to accept the rate.

Though the tariff is and will not be the only reason Laos will struggle to climb out of poverty, it will make it more difficult. SMEs will suffer. There will be job loss in the industries tied to transshipping or hit by high tariffs. FDI from neighbouring countries will decrease. The most impactful shift is that Laos will look for alternative markets, for example, with coffee, Lao Prime Minister Sonexay said that there could be an increase in coffee trade volume to Russia since selling to the U.S. is now going to be expensive. Laos will continue to draw closer to China as mentioned earlier with the 2025 Mekong-Lancang Special Fund Cooperation Agreement, a series of agreements to finance development projects. As one social media post stated earlier, ‘It is more likely that Laos will draw closer to its traditional allies in the East rather than to the West for the sake of economic survival’. China is Laos’ largest export partner and in terms of bilateral trade with Russia, it was about $8.3 million in 2024, rising 66% from the previous year. The 40% tariffs will only push Laos further into the hands of America’s foes, doing the opposite of protecting U.S. interests. 

In summation, Laos has gained little from the United States since its independence and the tariffs reinforce this idea. USAID cuts and complications with funding for unexploded ordnance removal were other negative messages to the Lao government and its people. It should be no surprise that Laos had little reaction to the 40% because of the many messages the United States has conveyed in the last 70 years. In addition, why fight for a better deal when the country trades more with its neighbours, China, and the EU. The tariff was further evidence that Laos has and most likely will remain a low priority for the United States.  

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ABOUT THE AUTHOR

Dr. P. Mike Rattanasengchanh is currently an International Affairs Fellow with the Council on Foreign Relations and on-leave as an Associate Professor of Asian history at Midwestern State University. He focuses on Southeast Asian history and U.S. foreign relations.

This article was edited by Douglas Brenton Anderson and Kalos Lau.