Thai govt prepares compensation package to mitigate impact of Trump's tariffs

The Star

2 days ago

BANGKOK (The Nation Thailand/ANN): The Thai government plans a compensation package to counter Trump's tariffs, with a proposal for tax cuts in the works, aimed at supporting affected sectors.
Following successful negotiations between Thailand and the United States, an agreement has been reached to reduce reciprocal tariffs from 36% to 19%, effective from August 7, 2025.
This reduction comes with a significant condition: Thailand will open its market to over 10,000 US products at a 0% tariff, including agricultural goods, while increasing quotas for sensitive agricultural imports from the US. Detailed discussions are still ongoing, and a list of products to amend customs duties will soon be presented to parliament for approval, a process that could take several months.
Deputy Prime Minister and Finance Minister, Pichai Chunhavajira, revealed that the government has tasked relevant agencies to expedite the finalisation of measures to alleviate the impact of Trump's tariffs. These will be tailored to each sector, with different businesses being affected in distinct ways, such as the electronics, processed foods, and electrical appliances industries.
'Some industries, like diamond and gemstone exporters, may be asked by buyers to bear part of the cost burden, such as half of the tariff. Meanwhile, other sectors, with high competition and multiple source countries, may pass most of the cost onto the American buyers or consumers,' Pichai said.
Sources from Government House revealed that the government is currently preparing a compensation package for affected entrepreneurs, exporters, and farmers. This will be presented to the Cabinet alongside the national economic restructuring plan. The compensation package will be divided into three main measures:
1. Subsidy Measures to Support Affected Groups
The government is implementing subsidy measures to support those impacted by the Trump tax, using existing funds to provide financial assistance to those affected. These measures include:
Competitiveness Enhancement Fund for Targeted Industries: The Cabinet has approved an additional 10 billion baht for the fund, sourced from the central economic stimulus budget for fiscal year 2025. This funding will be used to help upgrade machinery to digital technology, aiming to help restructure the country's economy.
Adjustment Fund for Production and Service Sectors: The FTA Fund will support farmers impacted by trade liberalisation by aiding in the restructuring of agricultural production. The Ministry of Commerce is preparing a budget proposal to further supplement the FTA Fund. Since 2006, the FTA Fund has supported 35 projects for agriculture, totalling 1.208 billion baht. However, new adjustments may be needed to align with US tax policies.
Budget Allocation for US Tax Impact: The government is also preparing a budget to address the impact of US tax measures, including 25 billion baht in the central economic stimulus budget for fiscal year 2026. This amount will be used to mitigate the effects of US tariffs during that period.
2. Low-Interest Loan Measures
The government is introducing soft loan measures through state-owned financial institutions, initially providing 200 billion baht. Additionally, the Ministry of Finance is working with commercial banks to prepare further soft loans to cushion the effects of the US tax measures.
These loans may be directed at businesses that need to stock inventory or those that require liquidity to continue operations during this period.
Furthermore, the government is studying the possibility of using the remaining 24 billion baht from the 2025 economic stimulus budget to repay debts to state-owned banks, such as the Bank for Agriculture and Agricultural Cooperatives (BAAC), the Export-Import Bank of Thailand (EXIM Bank), and the Small and Medium Enterprise Development Bank of Thailand (SME Bank).
By repaying 20 billion baht, the government could increase the lending capacity of these state banks by up to five times, or 100 billion baht.
3. Tax Measures to Support Business Adaptation
To help businesses adjust during the transition to a 19% tax rate, the government is considering various tax measures, including tax reductions, corporate income tax cuts, and tax credits. The Ministry of Finance is currently reviewing the details of these measures.
Previously, the Bank of Thailand (BOT) advised the government to continue monitoring and evaluating the effectiveness of the remaining 24 billion baht from the 2025 economic stimulus budget. Additionally, there should be processes in place to ensure transparency and public accountability.
The remaining funds may be allocated towards projects or measures that reduce the impact of the war and help the economy adapt in the long term. Further actions, such as strict enforcement of laws to prevent import flooding, thorough product standard inspections, and resolving trade disputes with foreign markets, are also being considered to mitigate the influx of foreign products in Thailand.
Government Aims to Turn Business Adaptation into Opportunity
Pichai stated that the 10-billion-baht Competitiveness Enhancement Fund, approved by the Cabinet, is under consideration to support businesses affected by US tariffs, including those that do not currently benefit from the Board of Investment (BOI) incentives. This will require an expansion of the fund's scope to include such businesses.
Pichai explained that in the long term, Thailand must transition from traditional manufacturing platforms to more modern ones. While the BOI's tax incentives may not directly apply, the government could use funding to support affected sectors and industries. Each case will be considered individually, focusing on the industries most impacted.
The government plans to provide special support to target industries, especially those affected, and those the government wants to remain competitive. This support will aim to help businesses remain competitive, as high costs could otherwise hinder their ability to compete in export markets.
Private Sector Requires Different Types of Support
Pongsarun Assawachaisophon, Deputy Secretary-General to the Prime Minister, stated that the government's support measures have been continuously discussed with business operators, with a focus on the specific product groups affected. The needs of each group of businesses differ.
For example, jewellery and gem exporters have raised concerns about the increased US import tariffs. Initially, importers may bear 40% of the increased import tariff, with another 40% requested to be covered by the government. The remaining 20% could be passed on to US consumers or reflected in price increases by US importers.
The jewellery and gem export group may request a 1-2 year adjustment period, asking for tax measures such as tax reductions, rather than soft loans. During this period, the government will look for other mechanisms to recover taxes concurrently.
Furthermore, the 10-billion-baht Competitiveness Enhancement Fund has been approved as part of the strategy to help businesses adapt and remain competitive during this tax transition.
Pongsarun added that the Thai team is currently negotiating the details of a Joint Trade Agreement with the US for over 10,000 items, including agricultural products. For some agricultural items, such as corn, the government will first purchase all domestic produce before considering imports. The government will set a market price for domestic produce to ensure that all local products are bought up first. - The Nation Thailand/ANN