The trade war between the US and China has had repercussions across the globe and slowed down the international trade. In the first two months of 2Q19, Thai exports continued to contract, with the outbound shipments in May 2019 totaling USD21.018 billion, a drop of 5.79 percent YoY. Hence, Thai exports in the first five months of 2019 (January-May) further declined from the first quarter to record a negative growth of 2.7 percent YoY due to a contraction in major export items and lower demands in major export markets.
Thai exports to the Chinese market were hardest hit as they contracted 7.9 percent YoY. The top-ten products suffering from the shrinkage of shipments consist of primary and intermediate goods including computers, computer equipment and parts integrated circuits and chemicals. Being part of the Chinese supply chains, these products are adversely affected by the trade war between the US and China. In contrast, Thai outbound shipments to the US in the first five months rose 21.8 percent YoY. If arms exports for military drills were excluded, Thai outbound shipments to the US increased 4.8 percent YoY, countering the downward trend of Thai exports to other major markets such as Japan, the European Union and China. The increase of Thai exports to the US was partly attributed to the fact that some American importers have shifted to Thai imports to replace the Chinese merchandise.
In the remaining seven months (June-December) of 2019. Thai external trade will continue to face a challenge from trade protectionism with the possibility of the Trump administration imposing tariffs on a further USD325-billion worth of Chinese goods amid the slowing growth of the global economy. The monthly average of Thai outward shipments in the first five months of 2019 was USD20.312 billion, while the exports in the remainder of the year are under pressure from additional punitive tariffs on Chinese goods. All eyes are now on trade negotiations between the leaders of the US and China during the G20 summit. Even if the talks lead to an apparent compromise, Washington will likely to continue threatening to proceed with punitive tariffs on Chinese merchandise during the remainder of this year. Based on the scenario that the US imposes punitive tariffs on the final lot of Chinese goods in the third quarter of this year, Thai exports for the entire 2019 will be impacted to the tune of 0.6 percent of GDP. Due to latest developments of the trade dispute between the US and China and the slowing global economic expansion, KResearch has revised the growth of Thai export value for the entirety of 2019 down from our initial projection of 3.2 percent to 0.0 percent, based on the assumption that Thai exports in the remaining seven months of 2019 will reach USD21.561 billion on average per month, which is higher than the average monthly exports in the first five months of USD20.312 billion.