The fluctuations in the stock market were mirrored by a surge in gold prices and a decline in oil values as global markets responded to intensifying trade disputes between the two largest economies in the world. This past week, the Thai stock exchange experienced significant downturns, echoing these global tensions.
While the U.S. postponed tariff increases on imports from Canada and Mexico, President Donald Trump announced a 10% increase on Chinese goods, prompting China to respond by imposing matching tariffs on U.S. products.
Local economic analysts and business leaders are preparing for a deeper impact on Thailand’s economy, which heavily relies on both the U.S. and China.
Rak Vorrakitpokatorn, the president of Thailand’s Export-Import Bank, highlighted the critical need for close monitoring following the new tariffs on China and potential future measures against the EU.
He noted that Thailand faces tariffs on products like solar panels, since China has shifted its production bases to Thai territory to sidestep U.S. tariffs.
“China maintains lower production and logistics expenses than many other countries, allowing it to absorb the impact of the additional U.S. tariffs. Therefore, the assumption that Thai products could replace Chinese goods in the U.S. market might be less feasible,” said Mr. Rak.
However, Mr. Rak mentioned that an increase in U.S. tariffs on Chinese goods could eventually open more opportunities for Thai exports to enter the U.S. market.
Despite this, he warned that Thailand is still at risk of facing increased tariffs, especially after recording a $40.7 billion trade surplus with the U.S. in 2023.
To mitigate risks, Mr. Rak recommended that Thai businesses diversify their markets to reduce dependence on the U.S. and China. He suggested looking towards markets like India, which has maintained neutrality and exhibits robust economic growth, including a thriving halal market due to its large Muslim population.
Mr. Rak also stressed the importance of financial tools like forward contracts for currency hedging, essential for Thai exporters to manage financial risks amid market volatility triggered by U.S. trade policies.
Businesses are advised to engage in scenario planning to proactively assess potential risks and devise strategic responses instead of reacting post-crisis, he added.
According to Mr. Rak, the global trade landscape is highly unpredictable, primarily due to abrupt shifts in U.S. policy, affecting global trade dynamics and creating uncertainty for both global and Thai economic prospects.
Inevitable Challenges
Paradorn Tiaranapramote, the first vice-president of Asia Plus Securities’ research division, pointed out that Thailand, contributing just 2% to U.S. imports, is less likely to be an immediate target for U.S. tariffs compared to Mexico, China, and Canada.
Mr. Paradorn noted that ongoing negotiations between the U.S. and several significant trading partners aim to adjust tariffs. Meanwhile, Thailand plans to negotiate with the U.S. to boost imports of American products like ethanol and improve military relations to mitigate tariff impacts.
In terms of trade dynamics, 13% of China’s exports go to the U.S., while the U.S. accounts for 17% of Thailand’s export market. He suggested that easing the trade war could mitigate impacts if the U.S. and China avoid implementing severe tariffs.
Kasem Prunratanamala, head of research at CGS International Securities in Thailand, highlighted concerns over potential U.S. tariffs on Thai exports given Thailand’s significant trade surplus with the U.S.
Mr. Kasem pointed out that electronics and electrical equipment, making up a substantial portion of Thai exports to the U.S., are vulnerable to higher tariffs.
He further noted that Thailand’s trade surplus with the U.S. increased from 5.5% of its GDP in 2023 to 6.6% in 2024, emphasizing the importance of the U.S. as Thailand’s largest export market.
According to the Trade Policy and Strategy Office, 29 Thai product categories are at risk of U.S. tariff measures, ranging from computers and mobile phones to jewelry and agricultural products.
Conversely, the Center for Economic and Business Forecasting at the University of the Thai Chamber of Commerce sees potential for Thai industries to expand their market share in the U.S., particularly in sectors like machinery and rubber products, as China faces new tariff threats.
Concerns Over Import Surge
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, expressed concerns over Trump’s tariff policies potentially complicating control over the influx of Chinese products, which could hurt local manufacturers.
Mr. Kriengkrai noted that Chinese companies might increase exports to Southeast Asia, including Thailand, intensifying price competition.
He advocated for stringent government measures to regulate Chinese imports and promote Thai products domestically.
The Customs Department has implemented a 7% value-added tax on low-valued imports to curb sales, and more frequent inspections are being conducted on online platforms.
The Joint Standing Committee on Commerce, Industry and Banking has urged the government to employ the 1999 Anti-Dumping Act and the 2007 Safeguard Measures on Increased Imports Act to effectively address these challenges.
Mr. Kriengkrai also suggested that at least 90% of the “Houses for Thais” project should involve Thai-made products, emphasizing the importance of supporting local industry.
