Bankers hope to mimic Vietnam deal

Bangkok Post

08-07-2025

The US's proposed 36% tariff on Thai goods is likely to severely undermine Thailand's export competitiveness, warn economists in the banking sector.
The best outcome Thailand can likely secure in trade negotiations with the US is a tariff rate of 20-25%, similar to the rate granted to Vietnam, said Kobsak Pootrakool, senior executive vice-president of Bangkok Bank.
NEGATIVE IMPACT
"If the final rate is higher, such as the proposed 36%, it would severely disadvantage Thai exporters and make it extremely difficult for them to compete in international markets," said Mr Kobsak.
"The most pressing concern is Vietnam already secured a 20% tariff rate. If Thailand faces a significantly higher tariff, foreign companies planning investment here may shift their investments to Vietnam, inflicting long-term damage to the Thai economy."
The US accounts for 18% of Thailand's exports. If the 36% rate is implemented, exports to the US could fall to 10% of the total, weakening bilateral trade relations over the long term, he said.
The government should act swiftly by expanding into new export markets and offering export loan guarantees for small and medium-sized enterprises (SMEs) to cushion the impact, said Mr Kobsak.
For some crops such as soybeans, which Thailand already imports in large quantities, tariffs may be eliminated. However, for other agricultural and livestock products, the government may need to negotiate special terms or allocate budgetary support to assist local producers, he said.
Despite a slowing economy, the baht is at its strongest level in 2-3 years, due primarily to its inverse correlation with the US dollar, he said.
To mitigate the effects of US tariffs, Mr Kobsak recommends exporters diversify into India, the Middle East, China, and Southeast Asia. He urged the government to guarantee export loans for SMEs through the Thai Credit Guarantee Corporation, while supporting SMEs through government procurement programmes.
'GIVE AND TAKE' STRATEGY
Pipat Luengnaruemitcha, chief economist at Kiatnakin Phatra Financial Group, said the Thai government may need to adopt a give-and-take negotiation strategy, rather than aiming for a win-win outcome, following the US announcing it will maintain a 36% tariff on Thai exports.
Citing the US-Vietnam negotiations, Mr Pipat said the US may expect Thailand to open its market further to American products, reduce import tariffs, remove non-tariff barriers, and address fraudulent origin labelling.
He suggested Thailand gradually liberalise sensitive sectors, particularly agriculture. While agriculture is a pillar of the Thai economy and employs a large portion of the population, the government could implement measures to mitigate any short-term impact, said Mr Pipat.
Thailand should also strengthen its competitiveness by attracting high-value and high-tech investments through incentives such as R&D support and tax credits to encourage electric vehicle parts manufacturing, artificial intelligence hardware production, and data centres, he said.
Mr Pipat said an integrated task force is needed, comprising the Finance, Commerce and Agriculture ministries collaborating with the private sector to enable swift and strategic decision-making. Clear communication with all stakeholders is vital, including the US and international investors, about Thailand's serious commitment to economic development, he said.
TOURISM A BUFFER
If higher US tariffs are applied to Thai exports, the greatest impact would likely be felt in electronics and electrical components, where Thailand could face intensified global competition, said Sathit Talaengsatya, an economist at UOB Thailand.
"Thailand maintains a competitive edge in tourism and hospitality, which should be developed into high-value service sectors such as wellness tourism to offset the impact on manufacturing exports," he said.