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30 Oct 2019


US GSP Cut: Thai Businesses Need to Brace for Uncertainties Ahead (Current Issue No.3047)


        ​ The US, October 25, 2019, announced the suspension of trade preferences for Thailand under the Generalized System of Preference (GSP), covering 573 items and costing approximately USD1.3 billion, effective over the next six months or April 25, 2020. Items that will no longer be eligible for GSP benefits account for one-third of Thailand's GSP trade, which totaled USD4.3 billion in 2018. Of the top 30 items (in order of the 8-digit HS Code) exported to the US (which accounted for 53.2 percent of Thailand's total export value to the US in 2018), only 4 items are eligible for GSP. Therefore, even if some of the 573 items are to be deprived of GSP benefits, Thailand's outward trade overall to the US will barely be affected.

          If the US does not show leniency towards Thai products and presses ahead with the suspension of GSP trade preferences, we at KResearch view that related Thai businesses may face higher tariffs at MFN tariff rates and the impact on the Thai business sector overall will likely be limited because most of Thai products should not be subject to higher tariffs, thus making them relatively competitive in the US. However, some Thai products are expected to experience more challenges in the US, in particular non-electrical incandescent lamps, eye glasses, detonating caps, certain processed foods and ceramic sanitaryware, while some products, such as certain ornaments, lead ore and chemicals, will likely lose their share of the US market due to substantial changes in tariffs and their low competitiveness. Given this, related Thai businesses will have to adjust quickly prior to April 25, 2020. In addition, an important issue for Thailand is not about maintaining GSP benefits or trade preferences, but adding value to Thai products so that they are sustainably competitive in global markets.

            Meanwhile, because Thai exports to the US have been undermined by the slowing US economy as a result of the persistent trade war and the stronger Baht, we at KResearch expect that Thai shipments to the US may grow 6.0 percent in 2019, thanks to a 14.1 percent growth reported during 9M19. However, a bleak outlook is seen for 2020 Thai exports to the US due to the high 2019 base, fragile US economy, sluggish trade and volatility in forex trading while the impact of GSP cut will be limited.