Knight Frank points to vulnerable sectors
Managing director Nattha Kahapana said the 36% levy, which is expected to be implemented and is scheduled to take effect on Aug 1, might intensify structural pressures already facing Thailand's economy.
"Even if Thailand attempts to negotiate for a lower rate, a win-win outcome is unlikely," he said. "Compared with Vietnam, taxed at a 20% rate, Thailand still lags in manufacturing competitiveness."
Mr Nattha warned that without clear mitigation measures, such as adjusting trade behaviour to align with global shifts, the tariff could disrupt Thailand's current account balance.
"The lack of a strategic response could also undermine Thailand's ability to attract foreign investment, particularly in the manufacturing, logistics, and industrial real estate sectors," he said.
Mr Nattha said foreign direct investment (FDI) remains a key driver of Thailand's economic development, contributing significantly to economic growth, employment, and innovation.
According to the Board of Investment, FDI hit record levels in 2024 with 1,910 projects receiving approval, up 42.7% from 1,338 projects in 2023.
The investment value surged to more than 727 billion baht, up from more than 552 billion baht in 2023, reflecting rising investor confidence.
This FDI surge was largely fuelled by Chinese investors seeking to mitigate geopolitical risks and diversify their supply chains, opting for alternative production bases in Southeast Asia.
China became the leading foreign investor in Thailand in 2023, with over 300 projects approved and the value of investments exceeding 100 billion baht, mainly in electronics, electric vehicles, and digital infrastructure.
The momentum continued in 2024, as Chinese-approved projects surpassed 700, with the value of investments reaching a new high of over 180 billion baht.
These investments align closely with Thailand's growth strategy, particularly in semiconductors and electronics, where Chinese firms are setting up export-oriented manufacturing plants.
However, these advantages come with risks. Chinese firms operating in Thailand could face increased scrutiny from the US, particularly regarding trade circumvention.
The US tightened regulations on transshipment and compliance, raising concerns that Thai exports linked to Chinese supply chains may face additional restrictions, said Mr Nattha.
Potential trade barriers may include new tariffs on Thai goods, stricter rules of origin, and heightened customs inspections on products suspected of bypassing tariffs on goods originating from China.
Compliance demands are also rising. Chinese firms using Thailand as an export base must ensure full transparency and documentation to avoid penalties.
The Thai government and local businesses must carefully navigate this evolving regulatory landscape to preserve long-term access to key markets.
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