Feel the Sting: US Tariffs Bite Back at Thailand, Exports Plummet and Chinese Imports Soar
Raised U.S. tariffs inflict significant damage on Thailand's economy, asserted Bank of Thailand governor
In an explosive warning, Sethaput Suthiwartnarueput, Governor of the Bank of Thailand (BOT), sounded the alarm on US tariffs damaging Thailand's economy. Access to the US market for several Thai industries could be cut off, leaving deep, lasting wounds. These concerns dovetail with growing alarm across Asia as the repercussions of US tariff measures, pushed under President Donald Trump, ripple through real sectors of the economy following months of financial market turbulence.
SMEs at Risk from the Chinese Dragon's Embrace
Export-dependent sectors like processed food, electronics, and auto parts — particularly tires — are especially vulnerable if the US market becomes inaccessible. But the domestic Thai market is also threatened, as goods previously destined for the US are increasingly redirected to Thailand, including products such as furniture, textiles, clothing, plastics, petrochemicals, and steel.
"Imports will surge from various countries, but especially from China," Sethaput warned. "Many of the sectors being hammered by this influx are dominated by SMEs, businesses that are already facing greater dangers."
The bank governor's stark warning underscores the necessity of vigilant policy-making as Thailand braces for both external trade shocks and internal structural vulnerabilities.
Time of Trouble: US Trade Policy Volatility and Sweet Smelling Tariff Relief
Since Sethaput's interview with Nikkei Asia on May 23, the US trade policy landscape has continued to spin out of control. On May 28, the US Court of International Trade moved to halt tariff collections, citing Trump's overreach. However, just one day later, a federal appeals court granted a temporary stay, keeping the tariffs in place for now, adding more fuel to the uncertainty fire engulfing global markets.
"Predicting outcomes is impossible," Sethaput said, admitting the central bank had to do something unprecedented: publish two parallel economic scenarios.
On April 30, the BOT revised its GDP forecast and presented two possible paths:
- Base case: GDP growth of 2% in 2025
- Worst-case: Growth as low as 1.3%
These projections align with the National Economic and Social Development Council (NESDC), which estimates Thai GDP growth in the range of 1.3-2.3%, with an average of 1.8% for the year.
Time's A-Wasting: The Tamper Tantrum Ahead
"We anticipate feeling the real impact of tariffs in Q3 and Q4," said Sethaput, emphasizing that much would hinge on the outcome of trade negotiations.
The BOT has already slashed its policy interest rate twice this year, bringing the benchmark rate down to 1.75%. "We believe monetary policy is already quite accommodative," said the Bank of Thailand Governor, highlighting that the central bank considers more than just inflation targets when making decisions.
"We've accounted for signs of slowing growth predicted to surface soon," he added.
"I can't tell you when the next rate cut will occur, but accommodative policy remains crucial for Thailand at this juncture."
Keeping it Stable: The Calm in the Financial Storm
Sethaput, formerly of the World Bank, has been BOT governor since 2020. His five-year term expires on September 30, but due to reaching Thailand's mandatory retirement age of 60 this year, he is ineligible for a second term.
Despite the mounting global uncertainty, Sethaput vowed that the Bank of Thailand would continue to maintain stability in the Thai baht, supporting not just monetary policy but overall economic growth as well.
"Thailand remains more bank-based than market-based, which means the financial impacts of trade tariffs are less severe than in countries like the US," he pointed out.
Although Thailand is once again confronted with powerful headwinds, Sethaput believes the current economic challenges are not as severe as previous crises.
"We still have the services sector, which should hold from even the surging tariffs," he said, suggesting that domestic tourism and other non-trade-dependent industries could provide critical support.
"This storm is not as bad as the ones we’ve weathered before," Sethaput declared, referring to the 7.6% GDP contraction in 1997 and the 6.1% drop during the Covid-19 pandemic in 2020.
- TAGS
- Trade Wars
- BOT
- Thai economy
- Sethaput Suthiwartnarueput
- US
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Enrichment Data:
Trade tensions between the US and Thailand have escalated, with potential consequences for several export sectors, including processed food, electronics, and auto parts. Here's a breakdown of the situation:
Impact on Thailand's Economy:
- Tariff Threats and Trade Imbalance: In April 2025, the US proposed a 36% tariff on several Thai goods, including seafood, vehicles, and manmade fibers. These tariffs directly threatened several export industries and created a sizeable trade imbalance[1][3][4].
- Negotiations and Proposals: Thailand responded to the US tariff proposal by pledging to increase imports of US goods, promote Thai investments in the US, and enforce stricter rules of origin to prevent transshipment violations[1][2].
- Strategic Stance: Thailand has proposed a wide-ranging strategy to address the trade imbalance, including enhancing market access, reducing tariffs, and reducing non-tariff barriers on over 11,000 items[2].
Impact on Key Export Sectors:
Processed Food
- Export Threat: Thailand's processed food exports, such as tuna, have faced the most immediate threat, with potential impacts of over 60% in tuna exports to the US if tariffs are enforced[5].
- Strategic Adaptations: Thailand has focused on boosting cooperation with US food processors, as well as importing more US agricultural products as raw materials to strengthen its competitive position in global processed food markets[2][4].
- Protecting Farmers: Thai officials emphasize that increased imports will focus on goods that do not compete with local agricultural produce, aiming to shield Thai farmers from adverse effects[4].
Electronics
- Beneath the Radar, But Vulnerable: While the electronics sector has not been directly targeted by tariffs, it remains a significant contributor to Thailand's manufacturing exports and could be impacted if broader trade tensions continue[1][2].
- Broader Proposals: Thailand's broader market access proposals, aimed at reducing tariffs and non-tariff barriers, could potentially benefit electronics trade if expanded to this sector[2].
Auto Parts
- Untouched, but Worries Persist: Auto parts have yet to be explicitly targeted by tariffs. However, the broader context of strained US-Thailand trade relations creates uncertainty for the sector[1][2].
- Defensive Moves: Thailand's economic partnership proposals, aimed at strengthening market access and enforcing rules of origin, could help maintain auto parts trade, but the sector remains exposed to potential future tariffs if negotiations fail[2][4].
Conclusion
Trade tensions between the US and Thailand have brought immediate threats to Thailand’s processed food exports and create uncertainty for some export sectors, such as electronics and auto parts. Ongoing trade negotiations will be critical to prevent significant trade disruptions and economic downturns. [1][2][4]
- The growing trade tensions between the US and Thailand, involving sectors like processed food, electronics, and auto parts, have raised concerns about the stability of Thailand's economy.
- SMEs in various sectors, such as furniture, textiles, clothing, plastics, petrochemicals, and steel, may face greater challenges due to surging imports, primarily from China, as a result of the US tariffs and ensuing trade imbalance.
- The Bank of Thailand (BOT) has highlighted the importance of vigilant policy-making to address both external trade shocks and internal structural vulnerabilities, especially as smaller businesses in various sectors may be adversely affected by increased imports and US tariffs.
