As revealed by InnovestX Securities via the ‘Kaohoon Jor Talad’ program on Thursday, Thailand’s economy is preparing for a considerable hit from U.S. tariffs set at 36%, imposed on the nation. Although this rate is less severe than the analyst’s worst-case prediction of 46%, the tariffs are prompting a significant reassessment of Thailand’s GDP forecasts, with expectations of substantial downward revisions.
With the Trump administration introducing a 10% baseline tariff on global exports, the analyst anticipates that affected countries may hasten to enter negotiations with the U.S. within the next two to three months. Meanwhile, Thailand could consider measures including proposing to eliminate or reduce tariffs for U.S. goods coming into Thailand, or increasing imports from the U.S. as parts of the talks.
However, InnovestX believes that even if Thailand is able to match the imbalance in trade, the U.S. is likely to maintain a 10% tariff, which could significantly shrink Thailand’s GDP growth in 2025 from the anticipated 2.5% to 1.7%. Worse still, if the 36% tariff is in place for implementation, Thailand’s economic growth could dip to -1.1%, with exports declining by approximately 5% and inflation rising by 1.5%.
In a more aggressive move, Thailand may contemplate retaliatory tariffs targeting key U.S. imports, such as industrial products, machinery, automotive parts, gemstones, and rubber, potentially causing a 10-20% contraction in Thai exports.
Nevertheless, if countries continue to retaliate against U.S. tariffs, it could lead to an ongoing cycle of tit-for-tat measures, escalating trade tensions globally. Entering into negotiations appears to be the preferred course of action for most nations, seeking to resolve these disputes through diplomatic channels rather than prolonged economic skirmishes.
While some suggest deploying non-tariff strategies, such as leveraging geopolitical considerations, to respond to these circumstances, the analyst sees Thailand’s influence may be limited.
One radical yet challenging solution would involve forming alliances to shift trade focus away from the U.S. towards Europe or other regions. InnovestX estimates that such global trade realignments could initially cause a 30% dip in world trade by 2025, with a recovery over the following years.
The analyst further notes that efforts to relocate manufacturing back to the U.S., as advocated by Trump, are impeded by the significant wage disparity between the U.S. and countries like Thailand. The brokerage firm predicts a potential transformation in global trade patterns in the near future, with reduced dependence on U.S. markets.
To mitigate the economic strain, InnovestX believes the Bank of Thailand (BOT) will call an emergency meeting and cut interest rates prior to the scheduled discussion date at the end of April. A coordinated response is urged, involving financial, fiscal, and trade sectors, to diminish the severe impact of U.S. tariffs.
