Thailand airs concern over tariff policy

Experts have urged Thailand to take proactive measures to minimize the potential harm from US President Donald Trump's tariff policies as the kingdom is particularly vulnerable to risks of higher reciprocal tariffs among emerging economies in Southeast Asia.

With a fast-growing trade surplus with the US, Thailand is highly likely to be a prime target in the coming round of tariffs, they said.

Their comments came after Trump signed an executive order on Feb 10, announcing a 25 percent tariff on all US steel and aluminum imports from March 12.

He later signed a memorandum directing his administration to determine "the equivalent of a reciprocal tariff with respect to each foreign trading partner", which could lead to higher tariffs for major trading partners by April.

Thai Commerce Minister Pichai Naripthaphan said last week that the government will do everything to make sure the kingdom doesn't become a target.

He said the country is ready to accommodate US requests to ensure a good outcome, Bangkok Post newspaper reported. Pichai also said he would visit the US for more discussions with US officials.

"It is highly likely that Vietnam and Thailand will be prime targets for the coming round of tariffs," said Arm Tungnirun, director of the Chinese Studies Center at the Institute of Asian Studies and Lecturer at the Faculty of Law, Chulalongkorn University.

He said that Trump might impose a general tariff on all imports, which means goods from all countries, in the future. The possible effects of such an approach on global trade and market stability depend on the scope and rate of the tariffs.

"My worry is that there is not much we can do about it. We can try to negotiate and provide Trump with a list of concessions. But no one can guarantee that in the end we can be exempted from tariffs," Arm said. "Sooner or later, with or without negotiation, Thailand will be hit with tariffs — the only question is to what scope and extent."

Statistics from the Thai Ministry of Commerce showed that the US is Thailand's largest export market, with an export value of $54.95 billion last year, accounting for 18 percent of total Thai exports.

According to the US Census Bureau, Thailand took 11th place last year among the countries with the highest trade surplus with the US, while China remains in the top position with a surplus of $295.4 billion.

As a country with an export-oriented economy, Thailand will see a drop in its products' competitiveness in the global trade market if the US expands its tariff policy to more countries, said Narongsak Putthapornmongkol, president of the Thai-Chinese Chamber of Commerce.

He said that industrial products, such as electronic devices, cars, rubber and food will be the most vulnerable. He estimated that the increase of tariffs would result in the slowdown of export growth and the economic decline of related industries, thus affecting employment and investments.

Overall economy

"If the trade environment becomes unstable, it will undermine the confidence of foreign investors and lead to changes in trade policy that may affect exchange rate and financial market volatility, which, in turn, affects the overall economy," said Narongsak.

After Trump's return to office, trade policies and international relations have gained greater attention, particularly under the "America First" policy, which places US interests at the forefront, said Burin Adulwattana, managing director and chief economist of Kasikorn Research Center in Thailand.

"The international economy will see a significant change where the US utilizes its economic greatness as a tool of leverage in the advancement of its political and security interests," he said.

To ease trade tensions, Burin suggested that the Thai government may need to consider increasing imports from the US, such as energy, soybeans and corn. Additionally, he said the US Federal Reserve may not be able to lower interest rates beyond the two interest rate cuts projected for this year if the impact of the trade war expands.

"As such, banking stocks will benefit from increased interest income in line with bond yields, but global stocks will be pressured, especially those traded at high values," he added.

To minimize the impact of the US tariff measures, Narongsak urged the Thai government and enterprises to strengthen regional and multilateral trade cooperation, explore new markets and reduce reliance on the US market.

"It is also important to increase the added value of Thailand's manufacturing industry, promoting smart manufacturing and technological innovation while enhancing product competitiveness to mitigate the impact of tariffs," he said, emphasizing the need to strengthen the domestic market and establish a flexible supply chain.

"Overall, Thailand needs to seek opportunities in the changing situation and reduce the potential impact of US tariff policies through multilateral cooperation, industrial transformation, and policy flexibility," Narongsak said.

yangwanli@chinadaily.com.cn