Thailand presents concluding proposal in United States trade negotiations, seeking competitive tax rates within the ASEAN region
The Thai Army has clarified that they use cluster munitions only aimed at military targets, while the country's focus remains on its ongoing trade negotiations with the United States.
Thailand's Deputy Prime Minister and Finance Minister, Pichai Chunhavajira, is set to meet again with the US Trade Representative (USTR) online this week, with expectations that the deal will be finalised by next week. The negotiations are crucial for Thailand, as the country hopes to secure a competitive tax rate in line with its regional counterparts.
If negotiations fail to lower the current tax rate, Thailand's GDP growth for 2025 would be limited to just 1.1%, with 2026 GDP growth at 0.4%. However, Thailand is aiming for a tariff rate of no more than 23%, a significant reduction from the current threatened 36% tariff level.
The proposed 23% tariff rate seeks to be competitive compared to other ASEAN agreements. Vietnam has agreed to a 20% counter-tariff rate with the US, while Indonesia has reached an agreement for a 19% tariff rate. The Philippines faces a 19% tariff after recent agreements to open markets and strengthen cooperation with the US.
Thailand is not the only ASEAN country facing US tariffs. Cambodia has negotiated down to a 36% tariff from an initially proposed 49% rate, while Malaysia will face a 25% tariff. Laos and Myanmar have tariffs set as high as 40%, but Singapore maintains a baseline tariff of 10%, largely unaffected by recent changes.
The US recently announced a reduced 15% tariff on Japan, down from 25%, after Japan agreed to open its markets, including importing cars, trucks, rice, and some agricultural products. The impact of Japanese investment on Foreign Direct Investment (FDI) in Thailand remains uncertain, depending on the sector and duration of the investment.
The SCB Economic Intelligence Centre (SCBEIC) has forecast three potential scenarios regarding the impact of US tax negotiations on Thailand: no tax reduction, partial tax reduction, or a reduction to a rate closer to that of the region. Investment decisions are generally long-term, with a focus on 5-10 years, making changing investment locations a complex process.
When deciding on where to invest, several factors come into play, such as investment readiness, land availability, labour, and overall costs. Thailand's GDP growth would be higher if the US agrees to a tax rate closer to that of the region, although specific growth rates were not provided.
The negotiations are in the final stage, with the deadline approaching on August 1, 2025. The outcome of these negotiations will significantly impact Thailand's economy and its future investment prospects.
- Thailand's Finance Minister, Pichai Chunhavajira, is meeting with the US Trade Representative (USTR) to finalize a trade deal, with the negotiations crucial for Thailand's competitive tax rate.
- If the negotiations fail to lower the current tax rate, Thailand's GDP growth for 2025 would be limited, potentially affecting business investments in the country.
- The proposed 23% tariff rate for Thailand seeks to be competitive compared to other ASEAN countries, with countries like Vietnam and Indonesia having agreements for lower tariff rates.
- The outcome of these US-Thailand trade negotiations will significantly impact Thailand's economy, affecting its future prospects in finance, business, politics, and general-news.
