Bangkok: Dr. Kobsak Pootrakool, President of the Federation of Thai Capital Market Organizations (FETCO), is closely monitoring the tariff rates imposed by China and India, following Thailand’s imposition of a 36% tariff, which is notably higher than Vietnam’s 16%. There is growing concern that this disparity may lead foreign investors to reconsider their interests in Thailand and potentially shift their focus to Vietnam.
According to Thai News Agency, Dr. Kobsak revealed insights from a series of letters issued by President Trump, which started with communications to South Korea and Japan, followed by several other countries. These letters indicate that there has been little change in the tariff figures since they were initially reported in April. President Trump seems steadfast in maintaining the current tax levels, with Thailand facing a 36% tariff, compared to Malaysia’s 26% and Vietnam’s 20%. The significant difference in these rates is a point of concern for Thailand.
The recent communication has impacted financial markets, with the Dow Jones Index dropping over 400 points. However, the Nikkei Index showed some recovery, indicating that the market could absorb the shock to some extent. The SET Index in Thailand also experienced a decline, but not as severe as anticipated. Despite these fluctuations, the global market has been bracing for such developments since the beginning of the year.
The 90-day extension aims to provide businesses with time to adjust and for President Trump to implement additional measures, such as the OBB measure, which includes financial aid for citizens, tax cuts, and support for SMEs. These measures are designed to mitigate the impact on the American stock market, leading to a depreciation of the dollar and a rise in gold prices. The crucial question remains on how China and India will respond to these tariffs. If China agrees to a similar 34% tax rate, Thailand will be at a disadvantage compared to Vietnam but on par with China.
Dr. Kobsak suggested that Thailand’s options are limited. Accepting the 36% tariff or negotiating for a reduced rate of around 25% are possibilities, though achieving a 10% reduction seems challenging. Alternatively, Thailand could follow Vietnam’s approach to achieve a 20% rate.
He emphasized that the recent letter should be seen as a warning that the proposed approach is unsatisfactory for the U.S. and that Thailand may need to negotiate further. If the tariff remains at 36%, it will significantly impact Thailand’s export sector, making products more expensive and burdening SMEs. The potential shift in direct investment away from Thailand to Vietnam due to lower tax rates is another pressing concern, as companies may reconsider their investment strategies based on these developments.