The US is pressing ahead with trade measures against trade partners globally. In addition to their new 'safeguard tariffs' on imported solar panels and large washing machines imposed early in 2018, and more recently on imported steel and aluminum, the US is now preparing to implement protectionist measures against Chinese products valued at around USD60 billion. This direction will likely add significant pressure to global trade, thus, KResearch views that all eyes should be closely kept on negotiations between the US and EU, both being among the largest economies in the world. Details on those negotiations are expected to be released before the relevant 'safeguard tariffs' on steel and aluminum become effective at the end of next week. If the EU and China are exempted from these new tariffs, prevailing anxiety will ease. But to the contrary, without such exemptions, China and the EU may opt to implement their own trade protectionist measures against the US, as well. This situation would likely escalate into further actions and reactions, incurring significant damage to trade that could spill over to other regions of the world.
In this circumstance, Thai businesses are not the US's main target and may not be seriously affected. KResearch maintains the projection of Thai export growth at 4.5 percent YoY in 2018, pending assessments of further development of the situation. Key factors for consideration include the following:
Direct impacts from distortions in the global economy and trade on Thai exports may deviate from KResearch's earlier expectation. If trade disputes aggravate and the volumes of exports that are in the safeguard list decrease, manufacturing activities and employment of these countries will be adversely affected.
As for indirect impacts on Thai businesses, they will need to proactively map out contingency plans, and a defensive stance must be prepared to cope with anticipated volatility in global trade that may well include many countries worldwide. Goods on the US safeguard list will likely face supply gluts and may need to be redirected to other markets. If Thailand decides to use anti-dumping and/or countervailing duties (AD/CVD) to protect our domestic market, considerable time would be needed before such measures could be implemented. Thus, business agility and flexibility will be key for us toward addressing issues related to the influx of foreign goods into Thailand. However, some Thai goods may be able to tap into rival markets of the US, benefiting from trade disputes between the US, EU and/or China. But such possibilities will largely depend on the readiness of Thai exports, our production capacity and the freight costs to each destination. Another challenge to be faced by Thai manufacturing is the fact that some of our products are not included in the supply chains of countries undergoing trade disputes with the US, EU and/or China, thus the use of Thai products to replace any inhibited by US trade barriers would be a difficult task. Therefore, Thailand will derive almost no benefit from this trade war. Moreover, if this dispute engulfs other product categories, negative impacts on global trade would become even more severe and eventually be hurtful to Thai business in general.