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Thailand: US reciprocal tariffs likely to have an impact on the Thai economy
On 2 Apr, US President Trump announced reciprocal tariffs on all trading partners following his conclusion of the "America First" Trade Policy Review. Thailand has been subject to a tariff rate of 36% on all exports to the US. The US remains Thailand’s largest export market, accounting for 18.3% of total exports in 2024.
Based on our preliminary assessment, Thailand is among the top 10 countries most impacted by the tariff policy. It is particularly exposed to the broader consequences of slower global trade and subdued global growth, given its significant dependence on international trade. As a result, we have revised our GDP growth forecast for 2025 down to 2.0%, from our previous projection of 2.9%. We now expect growth to rebound to 2.6% in 2026, partly driven by a low base effect, which is also revised down from our earlier projection of 3.0%. This adjustment reflects the cumulative and multiple adverse effects transmitted through various channels, particularly the decline in external demand, which are expected to significantly impact the Thai economy, further compounded by the effects of the recent earthquake in late Mar that may likely hit Thailand’s tourism sector and hence its services exports.
We now view that the central bank may potentially respond with further easing of the policy rate further to support growth, given the immediate and significant downside risks on growth. Given the uncertainties surrounding the tariff negotiations, weaker near-term outlook, exacerbated by the recent earthquake and low credit growth. We therefore expect two additional 25bps rate cuts to be delivered each in Apr and Jun, lowering the policy rate to 1.50% by the 2Q 25. Additional cuts may follow if the growth outlook continues to deteriorate.
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Enrico Tanuwidjaja
Economist
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Sathit Talaengsatya
Economist
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