SCB EIC highlights 5 key risks Thailand must not overlook amid US tariff tensions
The Economic Intelligence Centre (EIC) of Siam Commercial Bank has identified five key risks that Thailand must carefully consider:
1. Risk of losing US market share to rivals
Thailand’s key export products are at risk of losing market share in the US to competitors. Most of Thailand’s major export rivals currently face lower retaliatory tariffs from the US (based on the latest rates). This is especially critical for the electronics and electrical appliances sectors, where Thailand may lose ground to ASEAN competitors, Japan, and South Korea. Additionally, Thailand may face risks of “rule-of-origin circumvention” tariffs, similar to those imposed on Vietnam, leading to higher trade costs and stricter origin verification measures.
2. Agricultural and livestock sectors highly vulnerable if Thailand opens its market unconditionally
If Thailand agrees to open its market to US products without conditions (worst-case scenario), the agriculture and livestock sectors—particularly pork, poultry, and maize—would be highly exposed. These products have significantly higher production costs in Thailand compared to the US, even after including shipping costs. Moreover, domestic production is largely dependent on small-scale farmers.
While consumers may benefit from lower prices if the market is opened, this could pose a serious threat to food security. Domestic producers and players across the supply chain—especially smallholder farmers—would face widespread negative impacts.
3. Domestic demand and investment may weaken further in the second half of the year
Private sector investment is expected to contract, and consumption will likely slow further, particularly in Q4. Investment decisions may be postponed due to uncertainty over US import policy and potential retaliatory tariffs imposed on Thai exports, which may be higher than those on competitors. If competing nations face lower US tariffs, foreign investment could be redirected to those markets instead.
Additionally, a recent reduction in US–China retaliatory tariffs from previously over 100% may reduce Thailand’s advantage as a relocation destination for export production. Private consumption is expected to continue weakening into Q4, when Thailand will begin to feel the full impact of US tariffs. This could lead to job losses and further dampen domestic spending, at a time when consumer confidence has yet to recover.
4. Higher chance of two or more interest rate cuts this year
There is now an increased likelihood that the Bank of Thailand’s Monetary Policy Committee (MPC) will cut the policy interest rate twice this year, to reflect worsening economic conditions that are likely to be more severe than previously projected. If trade negotiations with the US fail, downside risks to the Thai economy will increase significantly, potentially prompting even more than two rate cuts.
5. The government must carefully weigh the pros and cons of opening the market to US goods
Thailand should thoroughly evaluate the implications of opening its market to US imports. Any tariff reduction deal must strike a balance between the benefits of lower retaliatory tariffs and the potential damage to local producers from increased foreign competition. One option is to allow conditional market access for selected products, rather than fully liberalising trade.
At the same time, the government must be prepared to provide support to affected businesses—through short-term liquidity assistance, efforts to find new markets, and measures to upgrade the competitiveness of domestic producers.