Thailand Braces for Trump's Trade Tariffs Impact

 

Economic and political experts in Thailand are calling for immediate action to prepare for global volatility and uncertainties caused by US trade tariffs under President Donald Trump's administration, warning that the measures could trigger a fresh economic and political crisis.

 

At a forum on Thursday titled "Turning Global Crisis into Thai Opportunity," Associate Professor Surachart Bumrungsuk of Chulalongkorn University's Political Science Department stated that the familiar era of free trade has effectively ended with Trump's victory.

 

"The world order with the US as its cornerstone has concluded. We are witnessing a transformation towards a new global paradigm that is only just beginning," he said.

 

Surachart noted that gold prices reaching $3,333 per ounce reflect mounting uncertainty in global markets. Historically, tariff barriers emerged during great power competition, suggesting increasingly volatile strategic relationships.

 

"The more trade wars intensify, the more tension we observe in international forums. The question remains: when will this tension lead to direct confrontation between major powers?" he questioned.

 

The professor described the emerging landscape as "five wars and one competition" – political warfare, trade warfare, financial warfare, technological warfare, information warfare, and arms race competition.

 

"We hope the current situation doesn't escalate into military conflict that could potentially trigger a world war. In this competitive environment, will warfare be utilised as an instrument? We must monitor whether the world will experience Cold War-style tensions without actual combat, or whether major powers might engage in large-scale conflict in the future," Surachart cautioned.
 

 

He emphasised that Thailand's 20-year national strategy has become obsolete after weathering three crises and facing fundamentally altered economic challenges.

 

"If we continue pushing the 20-year strategy, nothing will materialise. I suggest the Finance Ministry consider scrapping the strategic planning committee's budget entirely," he remarked.

 

 

 

Fifteen Key Preparation Areas

Surachart recommended 15 areas where Thailand must prepare for the economic fallout after 7 July, when the 90-day postponement of US retaliatory tariff increases expires:

 

New economic strategy development: The 20-year national strategy has effectively collapsed and cannot address future challenges. Thailand needs an economic strategy that addresses current realities.

Budget planning: Financial budgets must be appropriately sized to GDP and structured to withstand potential economic crises arising from Trump's new international approach.

Social sector preparedness: The government must address national security concerns as economic slowdowns increase the risk of business closures and unemployment, while managing living costs for citizens.

Production sector adaptation: Production capabilities must be adjusted to address economic polarisation, focusing on market-appropriate goods.

Industrial sector readiness to withstand US tariff increases.

Agricultural sector preparedness, which may face greater tariff impacts than anticipated.

Service sector planning, as travel and tourism are likely to decline, affecting national income.

Security sector preparedness, including decisions regarding US arms purchases.

 

 

Political sector readiness, requiring knowledgeable personnel, competent teams, and new understanding of international political economy.

Support systems for citizens affected by rising living costs and product prices.

Measures against product dumping from China.

Factory relocation planning and prevention of Chinese products falsely claiming Thai origin.

Management of public sentiment, which may intensify if negotiations with the US remain unclear by the 7 July deadline.

Political ramifications planning, as economic crisis after 7 July will inevitably have political consequences.

Electoral campaigning preparation, as economic issues will dominate future elections, with increased cash handouts and populist campaign advertising.

 

 

 

Four-Pole World Economy

Dr Kirida Bhaopichitr, Director of International Economic Relations Research at Thailand Development Research Institute (TDRI), explained that Trump's tariff policy aims to attract investment back to the US and increase national revenue.

 

The initial 10% tariff increase applied equally to all countries would generate an additional $300 billion annually for the US.

 

The aftermath will usher in what she terms "de-globalisation" – essentially a new world order.

 

"Trump's policies represent a complete transformation of supply chains and economic groupings established over the past 40-50 years," she said.

 

The new economic landscape may divide into four distinct blocs:

1. The United States, increasingly isolated by its tariff barriers with diminished foreign investment.
2. China and its allies, including Iran, Russia, African nations, and ASEAN countries.
3. Europe and its partners, such as Australia, Canada, South Korea, Japan, and Central American nations.
4. Neutral countries capable of trading with all groups, including India, Thailand, and Singapore.

 

This four-way split will not only segregate production supply chains but also fragment financial transactions. Chinese, European, and alternative currencies will gain prominence as the dollar's dominance wanes. Business operators will increasingly hold multiple currencies, diversify investments, and accumulate gold to mitigate risks.

 

 

 

Thailand's Neutral Position

Dr Kirida suggested that Thailand's neutral stance benefits its investment climate and economy.

 

Recent investments in electric appliances, electric vehicles, semiconductors, data centres, and biotechnology aligned with European nations have incorporated 40-50% local content, reinforcing Thailand's advantageous position.

 

TDRI proposed three approaches to prepare for Trump's tariff impacts:

Trade and investment adjustment: Thailand cannot rely solely on the US market and should expedite Free Trade Agreements with various partners, particularly Europe, while expanding into new markets like Latin America and Africa.

Investment attraction: This represents Thailand's best opportunity in 50 years, comparable to the Plaza Accord era. Thailand must leverage its neutrality to attract investment while adapting workforce skills to meet future investment requirements. The government should also support clean energy initiatives, maintain reasonable energy prices, and enhance digital infrastructure to better support business operations.

Financial and fiscal preparedness: With global inflation expected to decline, interest rates can be reduced. The Monetary Policy Committee may cut rates twice more this year, potentially reaching 1.75% by year-end, benefiting both citizens and businesses. This must be coupled with household debt reduction and income enhancement measures.

 

Regarding fiscal policy, Dr Kirida warned that Thailand must prepare funds for the future, acknowledging limited debt capacity.

 

"Cash handouts aren't the ultimate solution. Resources should be directed towards economic restructuring and SME support. If we mismanage fiscal resources and face credit rating downgrades, the impact will be severe. The government must plan spending with maximum efficiency," she concluded.