The United States emerged as Thailand’s largest export market last year, and the imposition of tariffs could significantly impact the local economy.
In response to growing trade tensions between major economies, the stock market experienced fluctuations, gold prices increased, and oil prices decreased last week, leading to a substantial drop in the Thai bourse.
While the US chose to delay tariff increases on Canada and Mexico, it raised tariffs on China by 10%, prompting an immediate retaliatory measure from Beijing that affected US products.
Local economists and business leaders are increasingly concerned about the potential ramifications for Thailand’s economy, given its reliance on trade with the US and China.
MONITORING REQUIRED
Rak Vorrakitpokatorn, president of the Export-Import Bank of Thailand, emphasized the importance of monitoring any anti-dumping measures and countervailing duties on Thai exports following the tariff hikes on China. Thailand previously faced penalties for its solar panel exports as China shifted production to avoid US tariffs.
“China’s production costs remain lower than those of many other countries, which makes it challenging for Thai products to replace Chinese goods in the US market,” stated Rak. However, he noted that should the US impose further tariffs on China, Thai exports could gain a renewed opportunity to gain market share.
Rak also pointed out that Thailand’s significant trade surplus of approximately $40.7 billion with the US in 2023 keeps it in the crosshairs for potential tariff increases.
In response to ongoing trade conflicts, Rak suggested that Thai businesses seek to diversify and explore alternative markets, such as India, which is positioning itself favorably amidst US-China tensions and has growth potential, especially in sectors catering to the global Muslim population.
Amid volatile financial conditions influenced by uncertainty stemming from US policies, exporters are encouraged to utilize financial risk management strategies to mitigate risks from currency fluctuations.
UNAVOIDABLE CHALLENGES
Economic experts have warned that Thailand could become a target of US trade measures, which may significantly affect the country’s trade sector. Agriculture and specific goods may face additional pressures for enhanced market access due to these trade negotiations.
Furthermore, potential relocations of production bases by multinational companies may offer Thailand some benefits, although the country must be ready to navigate these challenges proactively.
With ongoing negotiations, Rak and other economists believe that Thailand may need to continually assess the landscape for emerging risks and opportunities as US trade policy evolves.
Despite contributing only 2% to US imports, the Thai government is encouraged to strengthen its position to mitigate tariff impacts while promoting US imports such as agricultural products.
The emergence of a trade surplus with the US, recently surging from $29 billion in 2023 to $35 billion in 2024, highlights the importance of closely monitoring tariff policies and potential implications for various sectors, especially electronics and electrical equipment, which constitute a substantial portion of Thai exports.
PROACTIVE MEASURES REQUIRED
Considering the notable uncertainties in the global trade environment, economic leaders stress the need for Thailand to establish a coordinated response strategy between the public and private sectors. This includes the creation of a task force focused on trade negotiations to better prepare for the evolving landscape.
Additionally, ongoing collaboration and information exchange between government officials and business leaders will be crucial to navigate the projection of an increasingly complex trade environment.
Industry leaders are advocating for stronger government regulations to manage the influx of low-cost imports from China, which could exacerbate price competition in the Thai market. The call for action includes utilizing existing laws to better address rising imports and increase the promotion of locally made products.
As Thailand braces for potential changes in trade dynamics, the focus remains on enhancing its competitive edge in the global market while safeguarding the interests of local industries amid growing international competition.
