It is now apparent that Thailand will continue to lose its tariff privileges in penetrating the US market. In 2020, Thailand's GSP tariff privileges have been revoked twice, totaling approximately USD 2.2 billion, or 45 percent of export value for products that benefit from GSP (Total Thai exports claiming duty-free treatment under GSP in 2019 were valued at USD 4.817 billion). However, around half of all exports – 644 items to be precise – are still eligible for GSP treatment, and are considered key products with relatively high export value. Given that these trade preferences are determined by the US, it is imperative that both the Thai government and exporters hasten to adapt themselves continuously by enhancing the unique qualities of Thai products as to give them a competitive advantage over other exporters and meet the demand of US importers.
Thai exports to the US in 2020 have faced immense challenges from the lingering effects of the ongoing US-China trade war, purchasing power that has been weakened by COVID-19, and the first GSP cut earlier in April 2020. In fact, KResearch views that this year's US-bound exports have primarily been supported by the return of munitions for the annual Cobra Gold military exercise; while demand for electronics and computers for the purpose of working from home (WFH) helped to drive up the volume of Thai exports to the US by 6.4 percent, or approximately USD 33.3 billion worth of exports in 2020.
The main factor that is expected to affect Thailand's US-bound exports in 2021 is the trend of a US economic recovery, which depends on the stimulus packages to be issued by the new US president. The second suspension of GSP tariff privileges would subject Thai exports to regular tariff rates. This decision, which will take effect in January 2021, is unlikely to have much impact on the overall Thai exports to the US. Therefore, KResearch maintains its projection that Thailand's US-bound exports in 2021 will continue to grow within the range of 10 to 12 percent, with estimated export value of USD 36.7 to 37.3 billion under the leadership of Democratic presidential candidate Joe Biden. However, if incumbent President and Republican nominee Donald Trump manages to win a second term, Thai exports should still be able to grow close to 5.0 percent, with an export value of around USD 35 billion. A majority of goods from Thailand are set to experience growth, barring luxurious items deemed unnecessary for consumption, which may grow at a more sluggish pace. Nonetheless, Thai exporters are expected to bear the burden of increased tariffs as a result of the revoked GSP benefits, particularly among products that are locked in fierce competition with regional competitors in ASEAN, such as rubber/plastic mattresses, drive shafts for passenger cars, furniture parts, and ethylene/propylene plastic, pipe and valve.
Furthermore, the US election result is yet another factor that warrants close attention as it will affect the country's economic direction and its trade policies concerning Thailand, should Mr. Joe Biden become the next US president. However, if President Donald Trump were to remain in office for a second term, US-Thai trade relations would likely remain consistently fragile, going forward, as the US government would be expected to introduce different types of trade barriers, ranging from AD/CVD and safeguard measures to the continuation of the trade war with China, which indirectly affects Thai exports and may result in further suspension of GSP privileges for Thailand in the near future.
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