Measures proposed for Thailand to minimize US tariff impacts

Financial and banking experts in Thailand have warned that the U.S.'s proposed 36% tariff on Thai goods is likely to severely undermine Thailand's export competitiveness.

Kobsak Pootrakool, senior executive vice-president of Bangkok Bank said that the best outcome Thailand can likely secure in trade negotiations with the U.S. is a tariff rate of 20-25%.

If the final rate is higher, such as the proposed 36%, it would severely disadvantage Thai exporters and make it extremely difficult for them to compete in international markets, said Kobsak.

The U.S. accounts for 18% of Thailand's exports. If the 36% rate is implemented, exports to the US could fall to 10% of the total, weakening bilateral trade relations over the long term, he said.

He urged the Thai government to act swiftly by expanding into new export markets and offering export loan guarantees for small and medium-sized enterprises (SMEs) to cushion the impact.

To mitigate the effects of US tariffs, Kobsak recommends exporters diversify their markets, expanding into India, the Middle East, China, and Southeast Asia.

He urged the government to guarantee export loans for SMEs through the Thai Credit Guarantee Corporation, while supporting SMEs through government procurement programmes.

Pipat Luengnaruemitcha, chief economist at Kiatnakin Phatra Financial Group, said the Thai government may need to adopt a give-and-take negotiation strategy, rather than aiming for a win-win outcome, following the U.S. announcing it will maintain a 36% tariff on Thai exports.

Citing the U.S.-Vietnam negotiations, Pipat said the U.S. may expect Thailand to open its market further to American products, reduce import tariffs, remove non-tariff barriers, and address fraudulent origin labelling.

Thailand should gradually liberalize sensitive sectors, particularly agriculture, he suggested, adding that while agriculture is a pillar of the Thai economy and employs a large portion of the population, the government could implement measures to mitigate any short-term impact.

Thailand should also strengthen its competitiveness by attracting high-value and high-tech investments through incentives such as R&D support and tax credits to encourage electric vehicle parts manufacturing, AI hardware production, and data centers, he said.