SCB EIC emphasizes the importance of proactive measures to mitigate the impact of U.S. retaliatory tariffs on Thailand’s economy. Policymakers should prioritize fostering trade partnerships, diversifying export markets, and implementing targeted relief programs for vulnerable industries, particularly agriculture.
Higher U.S. Tariffs Threaten Thai Exports
SCB EIC warns that U.S. retaliatory tariffs on Thai exports, potentially higher than those on competitors, pose significant risks. Key Thai export sectors such as electronics and electrical appliances may lose market share to ASEAN, Japan, and South Korea. Thailand also faces the risk of circumvention tariffs, increasing trade costs and requiring strict origin verification, similar to Vietnam’s experience.
Impact on Agriculture and Domestic Demand
If Thailand opens its market unconditionally to U.S. products, the agricultural and livestock sectors—especially pork, chicken, and corn—would be vulnerable due to higher production costs. While consumers might benefit from lower prices, food security and small farmers could suffer. Meanwhile, domestic demand might weaken further in late 2024 as investment slows and consumption declines, partly due to tariff uncertainties and reduced foreign investment.
Policy Response and Government Strategy
The MPC is likely to cut policy rates twice more this year amid the worsening outlook. However, failed U.S. negotiations could increase economic risks, potentially prompting additional cuts. The government must carefully balance tariff negotiations, considering selective market openings and providing support to affected businesses through liquidity aid, diversification, and competitiveness enhancement.
