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26 Jul 2018

International Economy

Trade War Likely to be Prolonged in 2019 … Possibly Affecting Thai Exports at 0.5%-0.6% of GDP (Current Issue No. 2922)

           In 2018, the trade war provoked by the US may not produce significant repercussions on Thailand, given that the measures to impose new tariffs on solar panels, large washing machines, iron and aluminum since the beginning of the year has not involved considerable value. Despite, the first round of new tariffs worth USD50 billion and the second round to be collected in the remainder of this year, Thailand’s export opportunity loss amounts to only USD280-420 million. However, ongoing tensions that will be underlined with another USD200 billion of tariffs on Chinese goods will very likely be hurtful for Thai exports and business sectors next year.
           In 2019, trade conflicts between the US and China will surely intensify. KResearch believes this trade war will persist throughout the year. Due to the tariffs of USD50 billion and USD200 billion, net loss of Thai exports in 2019 will total around USD2.4-2.9 billion, or be equal to 0.5-0.6 percent of our GDP. Considering the list of goods that has been announced by the US, Thai goods may be classified into three groups: 1) Goods that could replace Chinese goods in the US market, e.g. plastics, integrated circuit boards and hard disk drives; 2) Electric and electronic goods (E&E) – E&E parts and components will be losers as they are part of the supply chain of China’s exports, while E&E consumer products that market in ASEAN will risk losing their markets to China; and 3) Iron products, also facing competition from China in ASEAN. 
The actual impact may not be lower than expected, depending on the business sector’s management of their supply chain to deal with such immediate problems. However, the above impact has not yet taken in the US plan to raise tariffs for automobiles under the “Section 232” national security-related tariff modifications, which will be followed later on.
Under the Trump administration that will continue for at least two years, all are anticipating how the trade war between the US and China will end. If the US goes on with imposing new tariffs on Chinese goods worth USD250 billion as already said, the year 2020 will be another turbulent time for international trade. Not only that Thai exports will be pressured, global purchasing powers and economies will also considerably weaken, thus further aggravating Thailand’s outbound trade situation.