The manufacturing industry in Thailand may experience a slowdown in the latter half of the year, primarily if the country fails to reach an agreement with the United States to lower the proposed reciprocal tariffs. The Federation of Thai Industries (FTI) has issued a warning that a 36% import duty on Thai goods, scheduled to take effect on July 8 after a 90-day grace period, could negatively impact exports if negotiations do not succeed in alleviating Thailand’s trade surplus with the US.
During the current 90-day period, Thai exporters have reported an increase in purchase orders. However, FTI Chairman Kriengkrai Thiennukul cautioned that demand might sharply decline once the tariff suspension ends.
Between January and April, Thai exports grew by 14% year-on-year, contributing to a 0.6% rise in the manufacturing sector, as trading partners stockpiled goods amidst uncertainty. Specifically, Inoue Rubber Thailand, a SET-listed manufacturer of auto parts and rubber products, anticipates higher revenue driven by new purchase orders from countries eager to increase inventories before the tariffs are reinstated, amid concerns about price fluctuations and market instability after the grace period.
According to Mr. Kriengkrai, the imposition of steep tariffs on Thai exports would have widespread repercussions on the manufacturing and export sectors, as well as diminish the competitiveness of Thai entrepreneurs. The Joint Standing Committee on Commerce, Industry and Banking has recently revised its export outlook, now predicting a slight contraction of 0.3-0.5%, down from an initial projection of growth between 0.3% and 0.9%.
The Federation of Thai Industries (FTI) anticipates that local manufacturers will respond to these challenges by reducing their workforce. Small and medium-sized enterprises (SMEs), facing cash flow difficulties, are either laying off staff or shutting down entirely as they grapple with the economic pressures.