The prospect of Donald Trump's "liberation day" on April 2 has sent tremors through Thailand's economy.
As the American president prepares to announce his reciprocal tariffs targeting countries with trade surpluses against the United States, Thailand finds itself among the "Dirty 15" -- nations specifically marked for punitive trade measures.
This development comes at a particularly vulnerable moment for Thailand. The country's economy grew just 3.2% year-on-year in the fourth quarter of 2024, falling significantly below market expectations. With private investment contracting and durable goods consumption showing strong declines, we have downgraded Thailand's economic outlook growth for 2025 to 2.5%, below the National Economic and Social Development Council's forecast of between 2.3% and 3.3%. The impending tariffs could reduce this growth further to a mere 1%.
Trump's trade policies are proving more aggressive and unpredictable than anticipated. His administration's approach to the reciprocal tariffs initially appeared to factor in not just tariff differentials but also non-tariff barriers and value-added tax (VAT) disparities.
Under such a broad calculation method, as analysed by Goldman Sachs, Thailand could face tariffs as high as 15-18%, reflecting differences in customs duties (6%), non-tariff measures (3%), and VAT (7%).
However, in a characteristic display of unpredictability, Trump recently suggested the April tariffs might be more lenient, excluding non-tariff barriers such as VAT, wage suppression and alleged currency manipulation from the retaliatory tariff calculations. This announcement has given markets a modest reprieve, though uncertainty remains the dominant sentiment.
The impact of Trump's trade actions is already visible in global economic indicators. The US manufacturing purchasing managers' index (PMI) has retreated to 49.8 from 52.7, reflecting contraction as rising raw material costs from import tariffs begin to bite. Consumer confidence in America has plummeted to its lowest level since January 2021.
Meanwhile, the euro zone is showing signs of recovery, with Germany's manufacturing sector expanding for the first time in nearly two years, driven by expectations of infrastructure and defence investments.
For Thailand, the stakes are particularly high. If the United States imposes a 6% tariff on Thai exports, we estimate it could slow GDP growth by over 0.5 percentage points. Under the more severe scenario where tariffs reach 15-18%, GDP growth could decline by 1 to 1.5 points from our baseline 2.5% projection.
The Bank of Thailand, which has thus far maintained a conservative monetary policy despite slower-than-expected economic growth, may be forced to make more aggressive interest rate cuts than the two currently anticipated, in August and October of this year.
Amid this challenging landscape, the Thai stock market has suffered, declining 15% year-to-date -- the worst performance among global stock markets. However, analysts see potential for a rebound, noting that negative factors have largely been priced in, while China's economic stimulus measures could positively influence Thailand's investment climate.
For investors navigating these turbulent waters, a "selective buy" strategy is recommended, focusing on stocks with specific positive factors. These include:
- Companies with strong environmental, social and governance (ESG) credentials and consistent dividend potential such as ADVANC, BBL and PTT;
- Quality dividend stocks with at least 20 years of continuous dividend payment history such as AP, SPALI and KBANK; and
- Undervalued SET100 stocks with profit growth potential in 2025, strong financials and regular dividend payment capabilities.
Dr Piyasak Manason heads the Investment Strategy Department, INVX-Research Group, at InnovestX Securities.
