Thai exports to the US contracted 2.7 percent YoY in 1Q20. Excluding products related to arms and tanks for military drills, which caused our export base to become volatile, our shipments to the US grew 15.8 percent YoY. The increase was supported by the US-China trade war, which helped bolster our key exports, i.e., HDDs and auto tires, to the US. Other Thai shipments that met the needs of American consumers, such as automobiles, auto-parts and canned seafood products, grew at favorable pace, as well.
However, the US recently became the center of the coronavirus (COVID-19) pandemic in the Americas, resulting in an economic stagnation like that seen in many other countries. KResearch expects that the US economy will remain relatively weak after 2Q20; therefore its full-year performance may shrink 4.0 percent. Since the US measures to combat the COVID-19 pandemic are hurting daily life, the economy and income of American consumers, spending on non-essential products will automatically decline and this will in turn threaten the purchase of products from Thailand throughout 2020.
Meanwhile, the COVID-19 pandemic has become a new downside risk that is forcing American consumers to be more careful about their spending and this is not a boon for Thai shipments to the US. Currently, more than 60 percent of Thai exports to the US are semi-finished products and luxury finished products. It is expected that American consumers may delay the purchase of such products ahead. In addition, the US decision to cut its GSP privileges on a number of Thai products will make it harder for them to penetrate the US market. These include luxury industrial products and foods. However, positive signs are seen in exports of Thai medical supplies and work-from-home products, but their value is not sufficient to support the overall Thai shipments to the US. Given this, KResearch expects that Thailand's outward trade to the US may shrink 9.2 percent to USD28,467 million, representing the first contraction in 10 years since the US financial crisis in 2009, which saw Thai exports to the US plummeting 17.8 percent. Nevertheless, if the US economy can quickly recover through economic stimuli, Thai exports to the US may contract at a slower pace of 7.3 percent to USD29,000 million. If the US cannot control the COVID-19 pandemic within 1H20, Thai shipments to the US may contract further to 12.8 percent to approximately USD27,325 million