US tariffs expected to dent GDP

The reciprocal tariffs expected to be announced by US President Donald Trump Wednesday could shrink Thai GDP by as much as 1.2 percentage points from a forecast of 2.5%, with the Bank of Thailand's one projected interest rate cut doing very little to shore up the economy, says InnovestX Securities.

Thailand is on the "Dirty 15" list of countries that could be affected by Trump tariffs. On average, the US tariff on Thai imports is 2%, while Thailand levies an average tariff of 8% on American products. Thailand's export exposure to the US is 29%, higher than Malaysia (26%), but less than Vietnam (47%), according to the brokerage.



For its determination of export exposure, InnovestX combines capital goods and intermediate goods. Piyasak Manason, head of economic research at InnovestX, said the brokerage projected four scenarios for US reciprocal tariffs on Thai products. The first is the US maintaining the current tariff for all imports from Thailand, which it estimates at a 40% likelihood, resulting in Thai GDP expansion of 2.

4-2.5%. An increase to an average 6% tariff, which has a 30% probability, would reduce GDP to around 2%, while a 10% average tariff has a 20% likelihood and would shrink GDP to 1.

7% in 2025, noted the brokerage. For the worst case, which is an average tariff of more than 10%, there is a 10% probability and GDP could decline to 1.3%, he said.

"For the worst case, the central bank's predicted policy rate cut this year would not help to shore up the economy because the impacts from the US tariffs would be so significant," said Mr Piyasak. Thailand relies heavily on international trade and could experience both direct and indirect impacts from reciprocal tariffs as other countries and global trade also feel the pinch of these tariffs, he said. "The global economy is at risk of mild stagflation, meaning slower growth alongside inflation that remains above the target," said Mr Piyasak.

"The Federal Reserve is expected to face policy challenges, with only a single 0.25% rate cut likely in 2025." According to Krungsri Securities, industries vulnerable to Trump's reciprocal tariff policy include those where Thailand imposes higher tariffs on US goods, such as automobiles and auto parts, agricultural products, and electronic components.

Citing external pressures on Thailand's economy, InnovestX lowered its 2025 target for the Stock Exchange of Thailand index to 1,350 points, down from 1,550. Investors are advised to diversify portfolios across regions and sectors, focusing on defensive stocks with strong domestic earnings and growth sectors abroad, such as artificial intelligence and clean energy. The March 28 earthquake is expected to cause a short-term tourism impact, with revenue losses of 10-15% over two weeks, noted the brokerage, with a recovery likely within a month.

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