U.S. forecasts 18% duty on Thai products; seeks revised conditions for mutually beneficial agreement
The potential imposition of an 18% tariff on Thai goods by the United States poses a significant challenge for Thailand’s economy and GDP growth prospects. This tariff estimate comes from Thailand’s National Economic and Social Development Council (NESDC), based on comparisons with rates negotiated with other countries like China, the UK, and Vietnam.
### Impact on Thai Economy and GDP Growth
Thailand currently enjoys a substantial trade surplus with the US of about $46 billion. The imposition of tariffs, particularly at 18% or higher, threatens to reduce the competitiveness of Thai exports in the US market, directly impacting export revenues and potentially shrinking this surplus.
Key export-dependent sectors such as agriculture, manufacturing, and processed goods could face reduced demand from US buyers. Furthermore, tariffs could disrupt supply chains and increase production costs, as some raw materials imported from the US (soybeans, corn, red meat) are used for processing and re-exports.
Thailand’s GDP growth is closely linked to its export performance. A higher tariff on exports to its largest trade partner could dampen manufacturing output and investment, slowing overall economic growth. While the exact GDP impact depends on the final tariff rate and duration, economists view an 18% tariff as a significant headwind.
### Current Negotiation Dynamics
Thailand is actively negotiating with the US to avoid or reduce this tariff. The Thai government has submitted revised tariff proposals, including potential 0% import tariffs on certain US products to balance trade relations and gain concessions.
The US Treasury Secretary has pushed back the effective date of any sweeping tariffs from July 9 to August 1, 2025, granting Thailand extra time to finalize agreements that could avert or mitigate tariffs. Thailand aims to cut the trade surplus with the US by 70% in five years, seeking overall trade parity within eight years by eliminating tariffs and expanding American imports. This strategy is intended to create a "win-win" scenario to satisfy both sides and avoid high tariffs.
### Comparison with Other Countries
Vietnam recently secured a 20% tariff rate, with additional waivers on American imports, setting a precedent as a negotiating benchmark. Thailand hopes to achieve a better deal but faces similar pressures. The tariff impact must also be viewed regionally, considering tariffs imposed on other Southeast Asian nations, as these affect competitive positioning in the US market.
### Conclusion
An 18% US tariff on Thai goods could constrain Thailand’s export revenue and slow GDP growth, particularly in export-led sectors. However, ongoing negotiations and Thailand’s willingness to offer tariff reductions on imports may help secure a more favorable outcome that limits economic disruption. The extended negotiation window to August 1, 2025, is critical for Thailand to finalize a deal that balances trade and growth objectives.
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**Key points:**
| Aspect | Detail | |-------------------------------|------------------------------------------| | Estimated tariff rate | 18% (potentially higher) | | Impact on exports | Reduced competitiveness, lower export demand | | Effect on GDP | Slowdown due to export disruption | | Negotiation status | Ongoing with extended deadline to August 1, 2025 | | Thai trade surplus with US | $46 billion, target to reduce by 70% in 5 years | | Thai concessions | 0% tariffs on some US imports, broad tariff elimination offered | | Comparison | Vietnam secured 20% tariff, setting benchmark |
- An increase in the 18% tariff on Thai goods could potentially impact the competitiveness of Thai exports in the US market, directly compromising export revenues and potentially shrinking the existing $46 billion trade surplus with the US.
- Key export-dependent sectors such as agriculture, manufacturing, and processed goods could experience reduced demand from US buyers due to the high tariff, potentially leading to a disruption in supply chains and increased production costs.
- Thailand's GDP growth is directly linked to export performance, and a higher tariff on exports to its largest trade partner could dampen manufacturing output and investment, slowing overall economic growth.
- In efforts to balance trade relations and secure concessions, the Thai government has proposed potential 0% import tariffs on certain US products while actively negotiating with the US to avoid or reduce the tariff.
- The impact of tariffs on Thai goods must be viewed not only in isolation but regionally, considering tariffs imposed on other Southeast Asian nations, as these affect competitive positioning in the US market.
