Abstract
SCB EIC warns that U.S. tariffs on Thai exports could harm the economy in five areas. Thai products, particularly in electronics, risk losing market share to lower-tariff competitors. Unconditional market opening could hurt agriculture, especially for small-scale farmers. Domestic demand is expected to weaken, leading to reduced investment and consumption, with potential job losses. The MPC may cut policy rates to address the worsening outlook. The government should carefully consider negotiations with the U.S., balancing tariff reductions with their impact on local businesses. Support measures for affected industries are also essential.
Summary
Impact of U.S. Tariffs on Thai Exports
SCB EIC indicates that U.S. retaliatory tariffs on Thai exports present significant risks for the Thai economy, especially in the electronics and electrical appliances sectors. Thai products may lose market share to competitors from ASEAN, Japan, and South Korea due to lower U.S. tariff rates. Additionally, Thailand could face circumvention tariffs, leading to increased trade costs and stricter origin verification measures.
Vulnerabilities in Agriculture and Livestock
If Thailand opens its market unconditionally to U.S. products, its agricultural sectors, particularly pork, chicken, and corn, could suffer, as production costs are higher than in the U.S. While this may lower consumer prices, it could jeopardize food security, especially for small-scale farmers reliant on domestic production.
Investment Challenges Ahead
The second half of the year is expected to see weakened domestic demand, with possible declines in private investment and consumption, particularly in Q4. Policy uncertainties, including U.S. tariffs, may lead to diverted foreign investment. The Bank of Thailand might consider further policy rate cuts if economic conditions worsen, emphasizing the need for careful negotiation strategies with the U.S. to balance gains and adverse impacts.
Source : Unresolved U.S. Trade Negotiations Ahead of the August 1 Deadline: Implications for Thailand
