08-07-2025
Analysts warn of 'tariff shock' if talks fail
The Stock Exchange of Thailand (SET) index could fall below 1,000 points and the country's GDP growth to less than 1% if the Thai negotiating team led by Finance Minister Pichai Chunhavajira cannot convince the US to lower its reciprocal tariff from 36%, analysts said on Tuesday.
Bualuang Securities (BLS) said the worst-case scenario would be a 36% tariff on US imports of Thai shipments, which would cause Thai GDP growth to plunge to 0.9%, while the SET index could fall to 980 points. It was 1,115.65 at the close on Tuesday.
In such a scenario, every major Southeast Asian nation would gain a competitive advantage over Thailand, the BLS note said.
Based on current information, the Thai tariff rate would exceed that of Indonesia at 32%, Malaysia at 25% and Vietnam at 20%.
'This scenario would cause a severe economic impact,' said Piriyapon Kongvanich, strategist at BLS.
Veeravat Virochpoka, head of research at FSS International Investment Advisory Securities, said the proposed US tariff on Thai goods also exceeds that on major Asian economies such as Japan, South Korea and Taiwan.
Export-oriented industries, particularly electronics, food and agricultural products, could be damaged by a high US tariff on Thai goods, FSS noted. Electronics companies ship an average 20-30% of their exports to the US.
'We remain hopeful that the Thai government can convince Washington over the next three weeks to lower the reciprocal tariff on Thai exports. The highest rate the market expects is 18%,' said Mr Veeravat.
Therdsak Thaveeteeratham, executive vice-president of the research division at Asia Plus Securities, also said the high US tariff carries downside risks for Thai GDP growth, pressuring the 2025 estimate to 1.3% and 1.5-1.6% for next year.
'Thailand may face tariff shock, especially with additional tariffs on exports of automobiles and parts, steel and aluminium,' said Mr Therdsak.
However, he said, in the worst-case scenario the SET index should not fall below its previous low of 1,056-1,060 points, the level recorded when US President Donald Trump first announced the reciprocal tariffs.
'If the government submits a really good proposal that prompts Trump to change his mind, we can expect some upside,' said Mr Therdsak.
He said the Thai negotiating team should take into account the possible adverse impacts of the proposed low tariffs on agricultural products imported from the US.
"A high proportion of the Thai economy and population is involved in the farming sector. If the tariffs on US imports are too low, both the social and economic impacts would be too high,' said Mr Therdsak. "The Bank of Thailand should lower interest rates to revitalise the economy."
