Bangkok: Pointing out that the "America First" policy is pressuring global trade, Kasikorn Research Center (KRC) is warning Thailand to accelerate the development of Free Trade Agreements (FTAs) to compete with rivals, while expressing concern that the strong baht is hindering competitiveness.
According to Thai News Agency, one year after Trump's tariffs, global trade dynamics have shifted significantly. The US-Thailand trade conflict remains unresolved, and KRC is concerned that the strong baht will inhibit Thailand's competitiveness, despite the potential for 1.5% export growth in 2026. KRC has also revised its GDP forecast for Thailand upwards to 1.9% and anticipates that the Monetary Policy Committee (MPC) will maintain interest rates next week, with a possible mid-year reduction.
Mr. Burin Adulwattana, Managing Director and Chief Economist of KRC, revealed that Donald Trump's "America First Trade Policy" has altered global trade directions and prompted adjustments in geopolitical strategies and supply chains across various countries. Tariffs initiated on China have expanded to many countries and industries, leading to increased uncertainty.
Despite these changes, the global economy has not faced severe impacts yet, as the measures have a delayed effect starting from August 2025, and most countries have not retaliated with tariffs. Although Chinese exports to the US dropped by around 20% last year, China maintained a record trade surplus of $1.2 trillion, bolstered by increased exports to ASEAN, the EU, and Africa.
The US is leveraging tariffs on specific products like steel, aluminum, automobiles, and semiconductors to bring manufacturing back home. While there is a rise in investment, overall manufacturing employment continues to contract, with growth seen only in a few sectors such as processed metals.
Looking ahead to 2026, the trade conflict is expected to persist as the United States, under its "America First" motto, aims to retain its leadership. Key events influencing global trade include a meeting between Presidents Xi Jinping and Trump in April, a court ruling on the use of the International Emergency Economic Powers Act (IEEPA) for imposing tariffs, a review of the revised United States-Mexico-Canada Agreement (USMCA) in July, the US midterm elections, and the anticipated cessation of retaliatory tariffs between China and the US by November.
Thailand must be vigilant about competition risks from India, especially in the gem and jewelry sectors within the US and EU markets, as Thailand lacks an FTA with the EU, leading to a tariff disadvantage. The government is urged to expedite FTA negotiations with both the US and the EU. India managed to secure an FTA with the EU after approximately 20 years of negotiations and also reached an agreement with the US, reaping benefits from the America First Trade Policy.
Mr. Burin further highlighted that, beyond the US Reciprocal Tariff, Thailand grapples with an overvalued baht. If the baht appreciates by 10% while competing currencies depreciate by 5%, Thailand will face a greater competitive disadvantage. He also recommended that the government tackle issues related to the informal economy to enhance economic transparency.
Nonetheless, if the AI trend continues to grow, Thai exports hold potential. KRC revised its 2026 export forecast from a 2% contraction to a 1.5% growth, after evaluating that the impact of US tariffs will be limited, unless Section 232 is further applied to electronic goods.
Moreover, Thailand's GDP forecast for 2026 has been revised upward to 1.9% from the previous 1.6%, driven by improved exports, sustained government policies, and a projected inflow of foreign direct investment (FDI). A stable government tenure would bolster confidence, but any disruption in elections or government formation could prompt a forecast revision. GDP in the first quarter of 2026 is expected to show slight positive growth, particularly fueled by the continued expansion of electronics exports.
For the upcoming MPC meeting, the policy interest rate is anticipated to remain unchanged, with a potential reduction by mid-year. For the entirety of 2026, an interest rate cut by 0.25% is projected.