Thailand’s economic growth will be hit by US tariffs on its exports, although the impact on activity won’t be as great as during the Covid-19 pandemic, a senior central bank official said on Thursday.
Nevertheless, the impact is expected to be both significant and prolonged, said Sakkapop Panyanukul, assistant governor of the central bank’s monetary policy group.
The US tariffs have halted some production and delayed investment decisions, and their effect on Thailand’s exports will be seen in the second half of the year, he told a briefing.
“Global trade policy uncertainty is a large and prolonged shock that will affect Thailand in many ways”, he said.
“Before the US announced the 36% reciprocal tariff on Thai imports, we projected GDP growth of more than 2.5% for this year. However, due to the tariff’s impact, growth is now expected to be lower than 2.5%,” he said.
“The impact will not be small but it will not be as severe as during Covid.”
The central bank initially forecast the 36% US tariff on imports from Thailand would primarily affect exporters who ship directly to the US, resulting in sector-specific export shocks.
President Donald Trump on April 9 announced a pause on all reciprocal tariffs as countries began lining up to seek negotiations. Thai negotiators are expected to meet their US counterparts in Washington next week. Meanwhile, a 10% baseline tariff on all goods still applies to almost all US trading partners.
Because of a strong start to 2025, full-year export growth may not be too badly affected overall, Mr Sakkapop said.
The Bank of Thailand currently forecasts export growth of 2-3% this year, as the tariffs’ primary effects are likely to be felt more strongly next year if they go ahead. In the worst-case scenario, the bank thinks exports could contract next year.
Mr Sakkapop said the US tariffs would affect Thailand through five main channels: financial markets, investment, exports, increased competition and a potential global economic slowdown.
The sectors expected to be hit the hardest are exports and manufacturing.
Key domestic industries expected to bear the brunt include agriculture, machinery and equipment, automotive and auto parts, electrical appliances and electronics, noted the central bank.
The impact on Thai exports is expected to become more apparent from the second quarter of this year, possibly triggering an export surge ahead of full enforcement later. Exports to the US account for 18% of Thailand’s total exports and around 2.2% of GDP.
Production relocation risk
The central bank has surveyed local businesses in the affected industries and found that many have adopted a wait-and-see approach in terms of business and investment decisions, especially those heavily dependent on US markets.
“Some businesses have already delayed new investment plans while awaiting further clarity. If Thailand faces higher tariffs compared to other countries, there’s a risk that production bases may be relocated,” said Mr Sakkapop.
Given this situation, restructuring of Thailand’s economy and affected industries is necessary to align with the evolving global supply chain.
In the short term, beyond ongoing negotiations with the US, measures should be taken to manage rising competition from foreign goods and to prevent transshipment.
In the long term, Thailand should focus on diversifying its export markets and strengthening regional supply chains, particularly within the region.
Mr Sakkapop said that inflation, already below 1%, is likely to fall, driven by supply-side factors, but there is no pressure on monetary policy.
In February, the BoT cut its key interest rate by 25 basis points to 2.00%, a move it said was a response to a weaker growth outlook and increased risks posed by global trade policy uncertainty.
Its next rate meeting is on April 30, when it is due to give updated economic forecasts.