The US announcement of reciprocal tariffs has sent shockwaves through the global market, with Thailand's GDP growth potentially falling below 2% this year.
Thai economists' warning follows President Donald Trump's decision to impose a minimum 10% tariff on all exporters, along with reciprocal tariffs on approximately 60 countries with a trade surplus. Thailand faces a 36% reciprocal tariff due to its 72% tariff on US goods.
Amonthep Chawla, executive vice president and head of research at CIMB Thai Bank, believes Trump’s move aims to reduce dependence on China and non-strategic partners while encouraging US firms to repatriate production. The measure seeks to address long-term US economic issues, including declining production capacity and existing trade barriers.
Amonthep suggested that Thailand could avoid further repercussions by demonstrating goodwill, such as lowering import taxes, removing non-tariff barriers, halting currency manipulation, increasing US imports, and investing in the US. He also recommended Thailand improve negotiations by clarifying that its tariffs on US goods are not as high as perceived.
He urged policymakers to prepare for the economic impact, including an influx of Chinese goods affecting domestic manufacturing, and to stimulate the economy to create jobs and revenue. He also expects the Bank of Thailand’s Monetary Policy Committee to cut interest rates on April 30.
Amonthep warned that Thai GDP could slip below 2% this year, given that exports account for 60% of GDP, with 20% destined for the US. He also anticipated a negative impact on tourism due to weakened confidence and purchasing power, predicting foreign arrivals could drop to 38 million instead of surpassing 39 million.
Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Securities, cautioned against retaliatory trade measures, given the US's status as Thailand’s largest export market. Instead, he recommended negotiations to mitigate the impact, such as reducing tariffs on US goods, opening markets, and easing trade restrictions.
He suggested Thailand offer alternative concessions to the US, such as increased imports of energy, agricultural products, and large goods like aircraft, weapons and machinery, or boosting investment in the US. Addressing US concerns regarding financial services, intellectual property, and labour rights would also be crucial, he said
Pipat emphasised the need to understand US interests, which encompass trade, military, security and international relations. He warned that seeking allies to negotiate tariff reductions may not be an effective strategy.
Santitarn Sathirathai, a member of the Bank of Thailand’s Monetary Policy Committee, described the US tariff hike as an economic “earthquake” with far-reaching consequences. He cautioned that an escalating trade war could heighten recession risks, complicate exports, and flood Thailand with foreign goods.
“I believe this is a global trade ‘earthquake’ that will impact Thailand more than most anticipate,” he said.
Santitarn advised the government and private sector to establish a crisis response team and prioritise trade war mitigation efforts. He urged businesses to prepare for long-term disruptions and adapt strategies to seize opportunities.
“This shock is not short-term; it will have lasting effects on global trade,” he concluded.
Source: The Nation
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
