The United States' tariff hikes are expected to have a prolonged and uncertain impact on Thailand's economy, particularly in key export-oriented sectors, according to the Bank of Thailand (BoT).
BoT Governor Sethaput Suthiwartnarueput said on Friday that while the full impact is likely to become clearer in the second half of the year, Thailand must brace for significant disruptions, especially if no agreement is reached before a global moratorium on tariff reductions expires in July.
Thailand was the United States' largest trading partner in Southeast Asia last year, with exports to the US accounting for 18.3% of total shipments, or US$54.96 billion. The US has cited a trade deficit of US$45.6 billion with Thailand. If unresolved, certain Thai exports could face a 36% tariff rate.
Mr Sethaput noted that the manufacturing sector would be most affected, though he said the impact would likely be less severe than during the pandemic. He warned of potential production relocations by multinational firms seeking to reduce costs, which could undermine Thailand's industrial competitiveness.
In response, he urged the government to adopt targeted measures tailored to each affected sector, rather than applying a generalised stimulus, focusing on agriculture, machinery and equipment, automotive and auto parts, electrical appliances, and electronics.
"Policies must be strategic and specific, addressing real vulnerabilities," Mr Sethaput said. He also highlighted the importance of maintaining foreign direct investment through better incentives and improving the ease of doing business.
A growing concern is the possible influx of imports as a result of diverted trade, particularly from China. Small and Medium-sized Enterprises (SMEs) are especially at risk from this trend, prompting Mr Sethaput to call for anti-dumping measures and stricter standards on imports.
He also emphasised the need for structural reform, particularly through a regulatory guillotine to remove outdated and burdensome rules, thereby enhancing overall economic efficiency.
The BoT governor outlined a four-phase economic trajectory for Thailand: a period of heightened uncertainty, followed by contraction, recovery, and ultimately an aftershock period. However, he cautioned that the economy was unlikely to reach its lowest point before the fourth quarter. Recovery, particularly in manufacturing and supply chains, could take at least a year.
Thailand's potential growth rate currently stands below 3%, he added. Without structural adjustments, this figure may fall even further, threatening long-term competitiveness and economic stability.
Sethaput: Full impact in second half