Bangkok: Thai stocks experienced volatility after the announcement that the United States would maintain a 36% retaliatory tariff on Thai goods, effective August 1. Analysts suggest that this move by the US may be a strategy to pressure Thailand into offering additional trade benefits. They recommend that Thailand establish a ‘war room’ to coordinate negotiations with the US, considering the comprehensive impacts of each potential concession.
According to Thai News Agency, Thai stocks opened with a decline of more than 10 points but later improved, with the index moving to 1,118 points, reflecting a 4.86-point drop by mid-morning. This fluctuation followed a letter from US President Donald Trump to 14 countries, including Thailand, affirming the continuation of the 36% tariff. Last year, Thailand had a trade surplus with the US valued at $46 billion.
Mr. Weerawat Wirojpoka, Senior Director of the Analysis Department at FSS International Securities, stated that the imposed tariff indicates dissatisfaction with Thailand’s current trade terms. He noted that the high tax rate compared to competitors such as Vietnam, Malaysia, and Indonesia could diminish Thailand’s competitiveness. This move by the US is perceived as a demand for Thailand to offer additional trade benefits, particularly impacting the food, electronics, and agriculture sectors.
Mr. Soraphol Tulayasathien, Deputy Managing Director and Head of Corporate Strategy at the Stock Exchange of Thailand (SET), highlighted that the market has been aware of the tariff’s implementation date change from July 9 to August 1. This extension provides a window for Thailand to negotiate. While the Asian stock market showed positive signs, there are no immediate measures in place to counteract the tariff’s impact. Investors are expected to have sufficient information to respond strategically.
UOB Kay Hian Securities (Thailand) believes the US’s communication aims to compel countries to relax restrictions on US products, potentially pressuring Thailand to open its agricultural markets further, especially for pork. An imposed 36% tariff could limit Thailand’s GDP growth to 1.3% this year.
Mr. Pipat Luengnarumitchai, Chief Economist at Kiatnakin Phatra Financial Group (KKP), remarked that the 36% tax reflects the ongoing dissatisfaction in US-Thailand negotiations, yet indicates openness to further talks. He emphasized the strategic disadvantage for Thailand, which is more reliant on US trade.
The imposition of such tariffs could severely impact Thailand’s export value, manufacturing sector, and foreign direct investment appeal. Thailand faces a difficult decision between protecting its agricultural sector and opening its market to US imports, which could affect numerous Thai workers and businesses.
Domestic political instability further complicates these negotiations, with decision-making potentially hindered by disunity among political parties. Comprehensive internal discussions involving the private sector and public participation are deemed necessary to navigate these challenges.
Thailand is encouraged to develop a strategic response, balancing trade concessions with efforts to enhance competitiveness, attract high-value investments, and distribute export markets more evenly. Establishing a unified negotiation team and accelerating free trade agreements with other major economies are among the recommended strategies to mitigate the impact of the US tariffs.