Current US trade policies and global reactions significantly influence the global economy, financial markets, and international trade. The Thai economy is under pressure from multiple sources, leading to heightened volatility and uncertainty, which may adversely affect exports, according to a Bank of Thailand report.
The United States’ current trade policies, coupled with reactions from major economies, are poised to significantly influence the global economy, international financial markets, and world trade. The Thai economy is likely to face pressure from this ongoing situation through various channels, although the effects may take time to manifest.
In the short term, the Thai economy is experiencing increased volatility in the financial markets, alongside a slowdown in production, trade, and investment due to heightened uncertainty. The impact of tariffs on exports is expected to become more pronounced in the latter half of the year. The severity of this impact will depend on the tariffs imposed on Thailand relative to other trading partners, as well as the retaliatory actions between major economies and the United States. The effects on the Thai economy will be transmitted through five main channels.
Increased Volatility in Financial Markets
Asset prices in global and Thai financial markets have become more volatile; however, overall liquidity and market functioning remain normal. The Thai baht has appreciated slightly against the US dollar since before April 2nd, by 2.71% as of 12:00 PM on April 17th, compared to the Japanese yen and South Korean won, which have appreciated by 4.75% and 3.11%, respectively.
The baht strengthened against US dollar in line with the region currencies, following the rapid depreciation of the US dollar due to concerns over its negative impact on the United States economy. The stock market has declined in line with the region, while Thai government bond yields have increased slightly.
Although there have been no unusual transactions from institutional investors. Overall, corporate bond issuance remains normal, but the financial conditions of businesses affected by tariffs need to be closely monitored. In addition, Thailand’s external stability remains favorable.
Investment: Wait and See
The ongoing high level of uncertainty has led to a delay in business and investment decisions (wait and see), particularly in industries that primarily export to the United States (electronics, electrical appliances, machinery, and automotive). Some are awaiting clarity before proceeding with new investments. In the future, if Thailand is subjected to higher tariffs compared to other countries, there may be a relocation of production out of Thailand.
Export impact postponed due to the 90-day delay in reciprocal tariffs
The increase in tariffs mainly impacts Thai exports, but uncertainty remains due to the 90-day postponement of reciprocal tariffs implementation. Consequently, the effects are anticipated to be more noticeable in the latter half of the year, with possible export growth in the second quarter, especially in processed foods.
Thailand’s export exposure to the United States accounts for 18% of Thailand’s total exports and 2.2% of GDP. The main sectors affected include the electronics, machinery, automotive, electrical appliances, and processed food industries. Moreover, Thai exports will experience additional impacts through the global supply chain producing for United States demand, including rubber, automotive parts, metal and steel, and chemical product, accounting for approximately 4.3% of Thailand’s exports.
Source: Thailand Business News
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
