Bangkok: Krungsri Research estimates that in the worst case scenario, if the US imposes a 36% import tax on Thailand, the export value will be lost by more than 162 billion baht. And if the US exempts import taxes, Thailand may be at risk of a Twin Influx situation, a flood of US-Chinese goods into Thailand.

According to Thai News Agency, Krungsri Research reported that on July 7, Thailand received a letter from the United States informing it that it was preparing to collect import taxes on Thai goods at a rate of up to 36%, which would take effect on August 1 if no new trade agreement was reached. Recently, the Thai government submitted an additional revised trade proposal after the first round of negotiations was unsuccessful.

If Thai exports are subject to import tariffs as high as 36%, which is notably high among US trading partners and significantly higher than competitors in the region, especially Vietnam, which has been able to negotiate tariffs down to 20% (and 40% for goods suspected of being transited), in a worst-case scenario, Krungsri Research estimates that Thai exports could be lost by 162.1 billion baht. The industries most affected would be textiles, leather goods and footwear, electronics and electrical equipment, food and beverages, rubber and plastics.

In the case that Thailand and the United States reach a trade agreement similar to the agreement between the United States and Vietnam, where the United States imposes a 20% import tax on Thai goods while Thailand exempts import taxes from the United States from 0%, the impact on Thai exports may be 9.3 times less severe than if the tax were imposed at 36%, or equivalent to a loss of 0.174 trillion baht in export value.

However, the exemption of import tariffs on US goods may solve one problem but will create another, especially the risk of a significant increase in US imports. The model shows that in the long term, US imports may increase by 27% or approximately 188.3 billion baht, with sensitive product groups such as agricultural products and food and beverages potentially facing an influx of US goods at a rate of over 100%, while other product groups such as automobiles and transport equipment, textiles, leather goods and footwear, rubber and plastics may also see double-digit increases in imports.

Opening the market to more U.S. goods in exchange for tariff reductions could lead to a ‘twin influx’, whereby U.S. goods are injected into Thailand at the same time as Chinese goods are injected into the country. Ultimately, a ‘twin influx’ could undermine competitiveness and hurt domestic manufacturing, particularly the agricultural sector, which employs 28.6% of the workforce. Amid escalating U.S.-China trade tensions, Thailand may have limited options to respond.

Therefore, it is necessary to accelerate market expansion and trade negotiations with other countries more, and seriously turn to solving long-term structural problems to reduce pressure from the trade policies of core countries.