Thailand is being urged to act swiftly to avert an economic crisis, following US administration’s announcement of a 36% tariff on Thai goods imported into the US.
Trinh Nguyen, senior economist at Natixis, a multinational financial institution, told Thai PBS World in an online interview that room for negotiation with US still remains open, as Thai Finance Minister Pichai Chunhavajira said that his team is still negotiating to reduce the tariff ahead of the the new deadline of August 1st.
She warned, however, that ongoing political instability and underperformance in tourism could further weaken the Thai economy amid mounting tariff pressure.
“While Vietnam is opening its market to the US, while Thailand is facing political turmoil and slower tourism growth. Thailand needs to stabilise its politics and enhance its domestic investment climate before August 1st. In my view, there is still time to reduce the tariff to just over 20%,” she said.
Meanwhile, the Kasikorn Research Centre projects that Thailand’s GDP growth could fall below 1.4%, if the US tariff remains at 36%.
Nguyen, based in Hong Kong, emphasised that, if the projection of 1.4% GDP growth is right, it would be extremely low compared to other ASEAN-5 members, warning that such sluggish expansion could severely test Thailand’s capacity to recover from economic shocks and tariff tensions.
“Compared to Vietnam’s 8% growth, just over 1% is a serious warning, but it could also serve as a positive push, both in response to Trump’s threat and in terms of domestic reform, since Thailand needs to preserve its high-margin industries,” she opined.
Trinh Nguyen, Senior Economist at Natixis. Photo credits to the Hinrich Foundation
In the mean time, Dr. Andrew Staples, Founder of GeoPol Asia, an advisory firm based in Singapore, cautioned that it may be difficult for Thailand to get tariff below 36%. He explained that President Trump may demand increased imports of U.S. agricultural products or aircraft orders in return.
Staples also pointed out that China’s expanding role in Southeast Asia has complicated tariff negotiations between regional countries and the U.S., as China’s supply chain dominance and political influence have prompted Washington to pressure Southeast Asian economies.
“Trump’s intent is to push China out of global supply chains. China holds significant economic and political influence in the region, particularly in countries like Cambodia and Laos, so the U.S. is using tariffs as a tool to curb that,” Staples said.
He added that, amid uncertainty, supply chains will gradually adjust, based on government policies, investment conditions and geopolitical dynamics. He does not, however, foresee a major shift in supply chains in the immediate future.
As ASEAN nations are caught in the geopolitical crossfire between China and the U.S., Staples noted that, in the long run, companies may choose to align with whichever bloc they feel more comfortable, with possible strategic relocations.
Dr Andrew Staples, Founder and Principal of GeoPol Asia. Photo credits to the Hinrich Foundation.
On foreign direct investment, Nguyen added that investors do not base their decisions solely on tariff rates. She stressed that demographic factors and political stability also play crucial roles.
“Tariffs are one factor, particularly when the differences are so significant. If Thailand can lower its tariff enough to remain competitive with China and stay out of the geopolitical crossfire, it could still be a very attractive destination for investment,” she explained.
Nguyen concluded by highlighting this as a critical moment for Thailand, to introduce stronger incentives for foreign direct investment.
“The 36% tariff isn’t just about Thai exports to the U.S. It’s about investment in Thailand itself. The country is a strategic base for producing and shipping goods globally,” she concluded.
By Franc Han Shih, Thai PBS World
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