The return of President Trump for a second term has heightened global uncertainty. The policies under Trump 2.0 are set to reshape the global order, particularly in trade, investment, and international relations. These shifts will put pressure on the global economy and impact business decision-making worldwide. Looking ahead, SCB EIC assesses that the U.S. will adopt an unpredictable policy approach, adjusting its stance based on negotiations. In our baseline, the U.S. is expected to implement reciprocal tariffs instead of the universal tariffs previously proposed during the campaign. Additionally, the U.S. may introduce specific tariffs targeting certain products or countries, such as automobiles, steel, and aluminum, or imports goods from China and Canada.
SCB EIC estimates that, under the baseline scenario, the U.S. import tariff hikes will raise the country’s effective tariff rate by approximately 11% from its previous level. If U.S. trading partners retaliate with counter-tariffs, a new wave of trade wars could cumulatively reduce global GDP by –1.3% and push global inflation up by 0.5% over the medium term. While the net economic impact on the U.S. may be less severe compared to the global economy, U.S. inflation is expected to accelerate further due to its tariff policy.
SCB EIC projects a slight slowdown in global economic growth to 2.6% this year, down from 2.7% last year, driven by the escalating trade war. However, countries are ramping up economic stimulus measures to mitigate external shocks. In response, Eurozone and China are adopting more expansionary fiscal policies. Germany plans to relax its debt brake rule to increase defense spending and has proposed a EUR 500 billion infrastructure fund for public investment over the next decade. Meanwhile, China is set to run a record-high fiscal deficit of 4% of GDP, allowing local governments to take on more debt, and planning to borrow RMB 500 billion to recapitalize state-owned banks.
Monetary policies among major economies will diverge and high uncertain this year. The U.S. Federal Reserve (Fed) is expected to cut interest rates by 50 bps as previously projected, despite persistent inflation risks that could be exacerbated by its own tariff policies. However, signs of an economic slowdown in the U.S., driven by the impact of Trump 2.0 policies and heightened policy uncertainty, support the case for rate cuts. Meanwhile, the European Central Bank (ECB) is likely to reduce rates more aggressively than the Fed. A total cut of 100 bps is expected this year, as Europe’s economy remains weaker while inflation is relatively lower. In contrast, the Bank of Japan (BOJ) is expected to continue raising rates by 50 bps this year to support the yen’s depreciation and ensure inflation remains sustainably above its target.
SCB EIC maintains Thailand’s economic growth forecast at 2.4% for this year, supported by tourism recovery, additional stimulus measures—particularly the remaining phase of the 10,000-baht digital wallet scheme—and continued public investment expansion driven by accelerated budget disbursement. However, the effectiveness of consumer stimulus will depend on how efficiently the funds are utilized. At the same time, U.S. trade protectionist policies are expected to pressure Thai exports and private investment, making Thailand highly vulnerable to the trade war through both direct and indirect channels. In recent years, Thai exports have become increasingly reliant on the U.S. market. Meanwhile, imports from China have risen. China has been gradually shifting away from its dependence on the U.S. and diversifying its trade with other markets.
Amid rising external pressures, Thailand’s manufacturing sector is expected to recover slowly this year. A key factor is the surge in imports from China, particularly capital goods and raw materials. At the same time, Chinese investment trends in Thailand are shifting—moving away from export-oriented production for the U.S. market toward domestic market competition instead. While private investment is set to rebound this year after a sharp contraction last year, much of this recovery is driven by capital goods imports linked to foreign direct investment (FDI). Meanwhile, domestic investment in other sectors remains weak.
SCB EIC notes that Thailand’s economic recovery remains sluggish, ranking among the slowest globally. This reflects multiple economic scars from COVID-19, which have exacerbated existing structural weaknesses:
- Scars in business sector: The business income recovery has been K-shaped, with large firms rebounding while many smaller businesses continue to struggle. The share of zombie firms—companies barely surviving—remains higher than pre-pandemic levels, particularly among small enterprises.
- Scars in Labor market: Despite steady improvement in labor market, labor mobility has deteriorated. The share of informal workers has continued to rise, yet their income remains nearly half that of formal workers.
- Scars in household sector: Household debt remains highl close to 90% of GDP, despite a slight decline. The main driver is a contraction in new loans, which limits private consumption. While the remaining phase of the 10,000-baht cash handout will provide temporary support, slow income recovery, high debt burdens, and tighter credit access will continue to weigh on consumption.
- Scars in fiscal sector: Public debt has risen sharply compared to pre-COVID levels and is expected to approach the 70% debt ceiling within the next few years. Although the government will run a high fiscal deficit in FY2025, the medium-term fiscal outlook will become increasingly constrained by structural weaknesses in the country’s fundamental.
With these enduring economic scars, Thailand’s recovery will remain K-shaped, and long-term growth prospects are likely to stay low.
SCB EIC projects that the Monetary Policy Committee (MPC) may cut interest rates two more times this year, bringing the policy rate to 1.5% by year-end. This is due to two key factors: 1) Financial conditions will remain tight, especially for high-risk borrowers. Financial institutions remain cautious in extending lending to retail borrowers, while the cost of issuing bonds for businesses with lower ratings is increasing.
The baht has appreciated rapidly compared to the regional currencies, adding pressure on exports. 2) Thailand’s economy is expected to face further headwinds from U.S. protectionist measures. Additional monetary easing would help support the economy amid such external and domestic challenges.
- Tight financial conditions persist:
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- Financial institutions remain cautious in extending retail credit, particularly to high-risk borrowers.
- Businesses with lower credit ratings face rising funding costs in the corporate bond market.
- The Thai baht has appreciated rapidly compared to regional currencies, adding pressure on exports.
- Additional economic impact from U.S. trade policies:
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- Thailand’s economy is expected to face further headwinds from U.S. protectionist measures.
- A more accommodative monetary policy would help support economic growth amid both external and domestic challenges.
Looking ahead, SCB EIC emphasizes that Thailand must urgently ‘strengthen from within’, by balancing both short-term and long-term strategies. Effective public communication is also crucial to build confidence in the government’s budget resource allocation for the country’s economic transformation.
This requires action through short-term policies to mitigate the impact of external uncertainties and adjust macroeconomic frameworks to support structural economic transformation. Long-term policies should focus on enhancing country’s competitiveness in various dimensions and uplifting government efficiency
The impact on Thai businesses is expected to intensify, particularly due to the U.S. Reciprocal Tariffs and Specific Tariffs, which will likely affect export-oriented industries such as electronics, automotive and parts, and petrochemicals. Additionally, there is a need to monitor indirect effects through key trading partners, such as China, in industries heavily integrated into supply chains that export to the U.S. market. The slowdown in major trading partners’ economies also poses further risks. Moreover, an influx of Chinese goods into Thailand may become more severe, along with a potential increase in U.S. imports into Thailand following trade negotiations. These factors could further pressure domestic production in certain industries. However, there may be positive opportunities for some Thai businesses to capture U.S. market share previously held by China or Mexico.
In this context, SCB EIC suggests that Thai businesses can use the 4P strategy to adapt and cope with
the pressures from Trump 2.0 policies and the issues of structural weaknesses in production side:
- Product – Develop products that meet market demands, differentiate offerings, and add value.
- Place – Diversify markets to reduce dependency on any particular market.
- Preparedness – Manage risks comprehensively, including supply chain disruptions and financial statements.
- Productivity – Increase productivity to strengthen firm competitiveness and ensure sustainable long-term business growth.
