The stock market fluctuated, gold prices surged, and oil prices fell as global markets reacted to renewed trade tensions between the world's two largest economies, while the Thai bourse felt the ripple effects last week as it plunged.
While the US delayed tariff hikes on Canada and Mexico, President Donald Trump's decision to raise tariffs on China by 10% was met with an immediate retaliation from Beijing, which imposed equal tariffs on products from the US.
Local economists and business operators are bracing for a more critical impact to the Thai economy, which is dependent on the US and China.
MONITORING NEEDED
Rak Vorrakitpokatorn, president of the Export-Import Bank of Thailand, said following the imposition of tariffs on China and indications the EU could be the next target, it is crucial to monitor any anti-dumping and countervailing duty measures on Thai products.
Thailand was hit with these trade penalties for solar panels, as China relocated its production base to Thailand to avoid US tariffs, he said.
"China maintains lower production costs and logistics expenses than many other countries, allowing it to absorb the impact of the additional US tariffs. Therefore, the assumption that Thai products could replace Chinese goods in the US market might be less feasible," said Mr Rak.
"However, if the US increases tariffs again on Chinese imports in the future, Thai exports may have a better opportunity to penetrate the market."
He said Thailand remains a target for tariff hikes as it recorded a trade surplus of US$40.7 billion with the US in 2023.
To navigate risks this year, Mr Rak advised Thai businesses to focus on exploring new markets to act as a buffer against volatility from reliance on the US and China, the two main players in the ongoing trade war.
Alternative markets include India, which maintains a neutral stance with the US and China, and it has strong economic growth prospects. India also has a halal market, which has significant potential given the global Muslim population of around 2 billion, a quarter of the world's population, he said.
Uncertainty regarding global trade stemming from Trump's policies could lead to volatility in financial markets, increasing risks for exporters due to exchange rate fluctuations.
As a result, financial risk management tools such as forward contracts to hedge against currency fluctuations will remain essential for Thai exporters this year, said Mr Rak.
Businesses should also implement scenario planning to assess potential risks, analyse their impacts, and prepare response strategies proactively rather than reacting after issues arise, he said.
The global trade environment is highly uncertain this year, particularly because of Trump's sudden policy shifts, said Mr Rak. While some countries or industries may benefit from this situation, the overall impact is likely to weaken global trade and add uncertainty to both the global and Thai economic outlook, he said.
Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group, warned Thailand faces higher risk from US trade policies, which could be used as a negotiation tool. This makes Thailand and Southeast Asia potential targets for US trade measures, which could significantly impact the Thai trade sector, he said.
Beyond the potential effects on exports, Thailand may also face pressure to grant greater market access to certain goods, including agricultural products, said Mr Pipat.
On the other hand, Thailand could benefit from multinational companies relocating their production bases. To navigate these challenges and secure the best possible outcomes, the country must be prepared, he said.
"Given Trump's negotiation strategy, the US is expected to begin trade talks with the European region first, followed by China and Asia's major economies," said Mr Pipat. "After that, the US is likely to turn its attention to Southeast Asia, starting with Vietnam and then Thailand, in line with each country's trade surplus with the US."
These negotiations could increase uncertainty and Thailand must monitor the implementation of US tariff policies. If the US negotiates with China, Asean and Thailand may benefit from production base relocations, he said.
UNAVOIDABLE RISK
Paradorn Tiaranapramote, first vice-president of Asia Plus Securities' research division, said Thailand contributes only 2% of the US's imports, less than Mexico (19%), China (17%) and Canada (17%), meaning Thailand is unlikely to be among the first targets of US tariffs.
Trump is negotiating with many countries over import tariffs. Most of these talks are with nations or regions that make up more than 10% of US imports, such as Mexico, China, Canada and the euro zone.
He said the Thai government will negotiate with the US to increase imports of US goods such as ethanol and agricultural goods, while improving its military relationship with the US in order to reduce tariff impacts.
Exports to the US make up 13% of China's total shipments, while the US accounts for 17% of Thailand's exports. If the US and China do not impose harsher tariffs or non-tariff measures and negotiate, the impact of the trade war would ease, said Mr Paradorn.
Kasem Prunratanamala, head of research at CGS International Securities (Thailand), said given Thailand's large trade surplus with the US, there should be concerns about potential tariff hikes on Thai exports.
The US Census Bureau ranks Thailand as having a substantial trade surplus with the US, he said.
Exports of electronics and electrical equipment formed more than half of total Thai exports to the US in 2024, and CGS believes these sectors could be hit by higher tariffs, said Mr Kasem.
The US was the largest export market for Thailand in 2024, with the Thai trade surplus with the US surging from $29 billion in 2023 to $35 billion last year. Thailand's trade surplus with the US increased from 5.5% of Thai GDP in 2023 to 6.6% in 2024.
China, Mexico, Vietnam, Ireland and Germany recorded the five largest trade surpluses with the US during the first 11 months of 2024, according to the US bureau.
The five most popular Thai sectors shipped to the US are: electronics; electrical appliances; rubber products; automobiles, auto parts and accessories; and machinery and parts.
Saharat Chudsuwan, managing director of Tisco Asset Management, said Vietnam has a higher trade surplus with the US than Thailand and is considered a proxy of China by some analysts, meaning it is at higher risk of a Trump import tariff.
However, Vietnam's economic growth is projected to be 6-7%, compared with less than 3% in Thailand, meaning Vietnam has a stronger economic buffer than we do, he said.
"We must not forget that during Trump's first term, a trade war existed, but there were no physical wars. Now there are actual wars going on, so all risks are higher for his second term," said Mr Saharat.
He said while Trump's policies pose high risks and volatility, his goal is to improve the US economy and domestic employment. As a consequence, countries doing business with the US should realise some benefits, said Mr Saharat.
An analysis by the Trade Policy and Strategy Office found 29 Thai product categories at risk of US tariff measures, including computers and components, mobile phones, precious jewellery and components, electrical machinery and agricultural products.
However, the Center for Economic and Business Forecasting at the University of the Thai Chamber of Commerce (UTCC) identified opportunities for Thailand to expand its market share in the US as China faces potential tariff increases, with machinery, electrical appliances, rubber and rubber goods, toys, games, and sports equipment all offering growth potential.
The US slapped tariffs on Chinese imports shortly after Trump took office, followed by a reciprocal move by Beijing.
WAR ROOM
Chaichan Charoensuk, chairman of the Thai National Shippers' Council, said the government should urgently set up a Trump 2.0 policy-focused war room and convene a meeting immediately after Commerce Minister Pichai Naripthaphan returns from the US.
He said a unified strategy between the public and private sectors is needed, with clarity on Thailand's position regarding negotiations following the US announcement of measures against Thailand.
Mr Chaichan said the auto parts sector has the potential to increase exports to the US after the announcement of tariffs on Mexico, which were quickly paused for a month. He said negotiations and adjustments to products may be necessary to meet auto parts market demand.
He said certain products require close attention, such as electronic parts, electrical appliances and rubber goods, as importers place orders in advance and they have been ramping up over the last three months, with a noticeable uptick in the volume of electronic parts.
Thanavath Phonvichai, president of the UTCC, said establishing a war room between the government and the private sector is essential because of Trump's background as a businessman, requiring ongoing communication and information exchange.
Mr Thanavath said Trump's actions are unpredictable, such as the recent tariff threats against Colombia, Mexico and Canada that are widely viewed as negotiation tactics. Contrary to Trump's bellicose speeches, a full-scale trade war does not seem imminent, he said.
Regarding the 10% tariff hike on Chinese imports, which is well below the threatened 60% rate, it is unlikely to have a significant effect on China as its products were already affordable, said Mr Thanavath.
While a full-blown trade war seems unlikely in the first half of this year, he said it could emerge later as the US grapples with persistent inflation of 2.9%. This inflation level hampers the Federal Reserve from lowering interest rates, and if prices rise further the Fed might have to raise rates instead, said Mr Thanavath.
Trump's measures appear to be more focused on reinforcing fiscal policies, he said.
Mr Thanavath said the commerce minister's trip to the US for preliminary negotiations could include talks with senior US executives, providing valuable insights into the American perspective on Thailand.
"Thailand is prepared to collaborate with the US to promote a balanced trade relationship. Trump has not mentioned Thailand, so we will have to wait until April to see how things unfold," he said.
FLOOD OF IMPORTS
There are fears Trump's new tariff policy will make it more difficult for the government to control Chinese products flooding the Thai market and affecting local manufacturers, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).
In addition to a hotter trade war, the tariffs have the FTI concerned over the indirect impact on Thai industries.
Chinese companies may opt to export more products to Southeast Asia, including Thailand, which is struggling to deal with the influx of low-cost Chinese goods, said Mr Kriengkrai. Cheap Chinese imports began to flow into the Thai market starting in 2020, then continued annually, causing a negative impact last year, he said.
Up to 23 industries have been affected by the Chinese product influx, with the FTI predicting the number of industries will rise to 30 this year, including steel, textiles and garments, and consumer products.
"If China faces obstacles to exporting to the US, its goods may flood Thailand and other trading partners, heating up price competition," said Mr Kriengkrai.
He said he wants strong government measures to regulate Chinese imports and promotion of more Thai products in the domestic market.
The Customs Department already imposed a 7% value-added tax on imports valued at less than 1,500 baht to slow their sales, and the Thai Industrial Standards Institute is conducting more frequent inspections of products listed on online platforms.
The Joint Standing Committee on Commerce, Industry and Banking asked the government to strengthen measures, using the 1999 Anti-Dumping Act and the 2007 Safeguard Measures on Increased Imports Act to better deal with the problem.
In terms of using more locally made products in state projects, Mr Kriengkrai said the "Houses for Thais" scheme should have at least 90% of the project's value comprised of Thai products.
