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Nation edgy as decision day looms
Nation edgy as decision day looms

Bangkok Post

time5 days ago

  • Business
  • Bangkok Post

Nation edgy as decision day looms

The new US tariffs are set to have global repercussions and impact various countries unless negotiations for more favourable rates can be achieved prior to Aug 1. The US intends to impose a 36% reciprocal tariff on Thai goods, which could hinder the competitiveness of Thai products in the US market, especially when compared with rival nations such as Vietnam. Aat Pisanwanich, an analyst in international economics and advisor on Asean affairs at Intelligence Research Consultant, recently explored the implications of the policy, its potential impact, and outlined actions that Thailand ought to pursue moving forward. What are the main objectives of the US tariff measures? The primary goal of the American tariffs is to lower deficits with its trading partners. Last year, the US recorded a global trade deficit of US$1.2 trillion. Additionally, the government aims to boost its revenue from the elevated tariffs to make up for declines in corporate and personal income tax receipts. The revenue generated from these tariffs is expected to be dedicated to military spending and managing immigration under the One Big Beautiful Bill Act (2025). For the 2025 fiscal year, US tariff revenue is projected to reach $100 billion, based on the implementation of universal tariffs at 10%. Should reciprocal tariffs be introduced on Aug 1, the US will gain even more in tariff revenue and could potentially lure investment back to the nation. What are the principles behind the US tariffs? The US has imposed new tariffs, commonly referred to as the "Trump Tariffs" on nearly all countries due to its significant and prolonged trade deficits. These tariffs fall into two main categories: Universal tariffs: Trump announced a baseline 10% universal tariff on all imports to the US, regardless of whether the US has a trade surplus or deficit with them. These tariffs came into effect on April 5. Reciprocal tariffs: Effective as of Aug 1. The tariffs are calculated based on trade data in 2024, using the following formula: Import Tariff Rate (%) = (US trade deficit with a country ÷ US imports from that country) × 100 ÷ 2 For example, the US trade deficit with Thailand in 2024 was $45 billion, while total US imports from Thailand were valued at $63 billion. By applying the formula (45 ÷ 63) × 100 = 71.4% ÷ 2 = 35.7%, the resulting tariff rate is approximately 36%. The US has also enacted product-specific tariffs as part of its trade policy. Under Section 232, which addresses national security, the Department of Commerce is empowered to impose tariffs aimed at protecting the nation's economic security. These include a 25% tariff on imports of steel, aluminium and auto parts. It plans to impose a 50% tariff on copper and a 200% tariff on pharmaceuticals. Under the Tariff Act 1930, the US has set some extraordinarily high tariffs, such as a tariff of over 3,000% on solar panels from Cambodia and a tariff above 300% on those from Thailand. The US administration has utilised Section 301 to impose tariffs on a wide range of Chinese goods. What are the reciprocal tariff rates the US plans to impose on imports? Starting Aug 1, along with a 10% universal tariff applied to all imports, the US will impose reciprocal tariffs on imported products from various countries, with the rate varying by nation. If no agreements are reached before the deadline, the tariff rates will come into effect (see accompanying graphic). Mr Aat outlined the implications of these reciprocal tariffs on exported goods. For instance, consider Product A from Thailand. Previously priced at $100, the cost in the US will rise to $136 after Aug 1. In contrast, Product A from Vietnam, also previously exported to the US at $100, will see an increase resulting in a final price of $120, or $16 less than the Thai product. Are any Thai industries expected to benefit from the US tariff policy? The imposition of a 36% reciprocal tariff is not expected to favour any Thai industries, and the impact will differ from sector to sector. Last year, the value of Thailand's total exports to the US reached about $63 billion, with 85% industrial goods and 15% agricultural products. About 30% of industrial exports are conducted by small and medium-sized enterprises (SMEs), while larger exporters, both domestic and foreign, account for the remainder. Mr Aat said the most heavily impacted group would be Thai SMEs, due to the higher tariffs, heightened challenges in terms of competitiveness, and limited working capital. At the same time, they are also facing competition from an influx of Chinese products into the Thai market. Which industries will be negatively impacted? Mr Aat's assessment, based on Thailand's trade surplus value with the US last year, suggests several key industrial products are likely to be adversely affected by the new tariffs. These include communication and telecommunication equipment; computers and data processing systems; machinery parts; car tyres; electronic equipment and semiconductors; electric transformers and power supply equipment; motors and engines; rubber products; and electrical appliances. Additionally, agricultural products expected to be affected include rice and rice products; fresh and dried fruits; fruit and vegetable juices; and fresh and processed vegetables. How will Thai consumers be affected by the US tariff measures? According to Mr Aat, Thai consumers could experience a drop in income caused by a decline in exports, which would significantly slow down the economy. Although expenses may remain stable, the rising cost of living could become increasingly burdensome. There is also a high risk of job losses, business closures, and an increase in household debt. What actions should the government take to support affected industries? Mr Aat said the government must raise and allocate funds to stimulate the economy, as Thailand's economic growth could fall below 1% without such a stimulus, or might even face a contraction. Moreover, the government must provide support to farmers and affected SMEs, which could include tax exemptions, establishing compensation funds, exploring alternative markets, subsidising production costs, and offering low-interest loans. How are other countries assisting affected businesses and individuals? Mr Aat said Thailand should consider China's comprehensive measures, which include broad economic stimulus strategies, consumer support initiatives, the modernisation of manufacturing facilities through advanced technology, and fostering innovation via research funding. China is projected to allocate around $1 trillion to these efforts. Meanwhile, Indonesia has announced plans to distribute cash to low-income groups, along with a 30% discount on train fares, targeting about 18 million low-income individuals at a cost of around $1.3 billion.

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