Economist says Thai exports could be affected by US trade slam on China

The latest round of US trade salvo against Chinese goods could dampen the prospect of Thai exports as Thailand’s outbound shipment can contract this year, said Thanawat Polwichai, Director of Economic and Business Forecasting Centre at the University of Thai Chamber of Commerce.

On May 10, the US started raising tariffs to 25 percent from 10 percent on USD200 billion of goods from China. Moreover, US President Donald Trump threatened to place 25 percent tariffs on the other USD325 billion of Chinese goods, claiming the slow pace of trade deal negotiations was the cause for the new restrictions.

Thawawat said the latest tariff hike from 10 to 25 percent on Friday shocked the world because prior to this, there were signs that the two sides were on the verge of reaching trade agreement after they engaged in trade negotiations for three months.

He said the latest move affects the investors’ confidence and the global economic sentiment. The world economy may expand only 2-2.5 percent against 3 percent of original forecast.

Chinese exports to the US will become more expensive, Chinese exporters are expected to dump their products in Asian and Asean markets by using pricing strategy. Moreover, Thai exports to China will drop especially the items that Chinese uses as raw materials such as rubber, plastic pellets, fruit and computer.

Thawawat said due to sluggish global economy, the impacts from trade war and strong Thai Baht, the Thai outbound shipment has recorded negative growth since the fourth quarter.

Hence, Thawawat expected the Thai exports to grow between – 1 to 1 percent from the original forecast of 2.3 percent this year.

Kasikorn Research Center estimated that the impacts from the US trade spat with China to date make Thai exports suffer at the tune of USD2.1 billion.

The think tank also noted that in the worst-case scenario, if the US decides to raise tariffs on additional USD325 billion of Chinese goods, the impacts on Thai exports may increase to USD3.1 billion.

This is because a number of Thai products are part of the supply chain of Chinese goods under the USD325 billion list, such as hard disk drives and integrated circuits, wood products and plastic pellets. Chinese producers imported these products from Thailand for their downstream manufacturing.

The US trade war with China may dent Thai exports by 0.2-0.6 percent during the remainder of this year, said Kasikorn Research Center.

Deputy Commerce Minister Chutima Bunyapraphasara said that Thailand lost an estimated USD780 million worth of export revenue from the ongoing trade spat between the US and China in the 12 months ending on March 31.

The ministry will closely monitor the trade war and evaluate the situation and discuss plan to promote exports in the second half during the meeting of directors of Thai Trade Center offices worldwide at the end of May.

Although some think tanks forecast that Thai export growth may contract this year, the Commerce Ministry is still positive that Thai outbound shipment will continue to expand, she added.

The US trade salvo to impose punitive tariffs may also lead to all-out economic war. In Beijing, the Commerce Ministry said China “deeply regrets” the decision to increase the tariffs and “will have to take necessary countermeasures.”

Pattaraporn Hiranyawong, an economist of the Bank of Thailand, said the US companies might also suffer from the US tariff increase because it results in higher imported cost for American companies and that can affect the inflation rate in the future.

Last year, soft drink Coca-Cola had to raise prices on its sodas because it now costs more for Coke to produce aluminum cans due to rising costs of imported aluminum.

In her report titled “One year of trade war, does it really make America great again?”, Pattaraporn said the trade war is likely to be a long drama. Thailand should closely follow and brace for incidents that may be evolved in the future.


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