Ninety-Day Reprieve: Thai Exporters Navigate US Tariff Uncertainty

 

The Federation of Thai Industries (FTI) has painted a picture of frenetic activity within the Kingdom's export sector, as businesses race against the clock to maximise shipments to the United States in the 90-day window before full-scale retaliatory tariffs potentially come into force.

 

This comes as the US announced a temporary pause on country-specific tariff hikes, while still imposing a baseline 10% increase across the board – a move interpreted by many as both a window of opportunity and a significant challenge for Thai enterprises.

 

 

The Ninety-Day Dash: A Double-Edged Sword

FTI chairman Kriangkrai Thiennukul articulated the complex situation, acknowledging that the delayed implementation offers a crucial breathing space for industry.

 

However, he stressed the underlying uncertainty that persists beyond this temporary reprieve. Many factories, he revealed, had previously been contemplating workforce reductions and output cuts.

 

Now, the immediate priority is to secure as many orders as possible, ramp up production lines, and even increase imports from the US, driven by apprehension about what the future holds once the 90-day period concludes.

 

Kriangkrai highlighted a potential advantage for Thailand and other manufacturing powerhouses, noting that China remains uniquely excluded from this tariff reprieve, facing a hefty 145% import duty.

 

This stark differential, exceeding 100% compared to other nations, positions Thailand favourably, even against competitors like Vietnam, which faces a 46% tariff compared to Thailand's 36%.
 

 

 

"This initial scenario suggests Thailand could gain a 10% advantage over Vietnam and a significant margin over China, potentially mitigating any large-scale exodus of manufacturing," Kriangkrai observed.

 

 

 

However, he cautioned against premature optimism, warning that if ongoing negotiations lead to bespoke agreements – for instance, a tariff reduction for Vietnam to 25% without a similar concession for Thailand – the Kingdom could find itself at a distinct disadvantage.

 

 

Strategic Recommendations and Investor Confidence

In response to this fluid situation, the FTI is advocating for proactive measures, urging the Export-Import Bank of Thailand (Exim Bank) to significantly bolster its credit facilities for exporters.

 

The current surge in orders necessitates increased procurement of raw materials and a substantial injection of working capital to meet demand within the 90-day timeframe.

 

Kriangkrai proposed a minimum doubling, or ideally a 150% increase, in Exim Bank's existing credit lines to support all affected businesses.

 

The electrical appliance sector stands out as one requiring immediate attention, with a need to accelerate both imports and exports.

 

Currently, the US offers tariff exemptions on only a limited range of Chinese goods, predominantly smartphones, solar panels, tablets, and semiconductors.

 

Despite the tariff turbulence, WHA Group, a major industrial estate developer, reports sustained investor confidence in Thailand. Enquiries with over 200 clients holding Letters of Intent revealed that the majority remain committed to their investment plans within the Kingdom.

 

 

Notably, this includes a significant Chinese investor seeking over 500 rai (around 197.6 acres), and existing clients within WHA's industrial estates show no inclination to withdraw or relocate their operations.

 

WHA Group CEO Jareeporn Jarukornsakul underscored that the continued investment interest from Chinese firms is likely due to Thailand's relatively favourable tariff position compared to China's prohibitive 145% rate and even Vietnam's 46%.

 

However, the prospect of relocating production to even lower-tariff regions, such as South America, presents significant hurdles, requiring substantial capital outlay and a lengthy 2-4 year timeframe for establishing new facilities – a period that could well outlast the current US administration.

 

 

A Race Against Time and Market Manoeuvring

Poj Aramwattananont, chairman of the Thai Chamber of Commerce, confirmed that exporters are in a frantic rush to dispatch goods against existing orders to minimise the looming tariff impact.

 

Shipments must reach US shores before May 27, 2025, to avoid the initial 10% levy.

 

This urgency is compounded by logistical challenges. Sea freight to the US East Coast takes approximately 50 days, compelling exporters to load vessels no later than May 10-15, 2025, to meet the tariff-free deadline. For West Coast destinations, the deadline extends to May 25, 2025.

 

Emerging reports also suggest a degree of pressure from US importers, who are reportedly seeking price reductions on Thai goods, citing the weakening US dollar and uncertainty surrounding final retail prices and potential tariff burdens.

 

Meanwhile, the rice market is witnessing its own upheaval. Charoen Laothamatas, president of the Thai Rice Exporters Association, described the 90-day tariff extension as creating unwelcome uncertainty for trade.

 

US rice importers are capitalising on this temporary window to aggressively increase orders of Thai rice, with some seeking to double or even triple their usual volumes.

 

However, Thai exporters are wary of payment risks, particularly given the strengthening Thai baht, which has been buoyed by the weakening US dollar under the current US trade policies.

 

Charoen also pointed out the disparity in impact compared to Vietnam, which exports significantly less rice to the US. He cautioned that finding alternative markets to replace the US, a key premium market, will be a considerable challenge for Thai rice exporters.

 

 

Widespread Concerns and Government Intervention

The Industrial Estate Authority of Thailand (IEAT) has voiced significant concerns, highlighting that over 80 categories of Thai exports are vulnerable to the 36% US retaliatory tariff. 

 

These include crucial industrial components such as machinery parts, automotive components, electronics, as well as consumer goods like jewellery, sporting equipment, chemicals, brake linings, moulds, electrical appliances, steel, and aluminium.

 

IEAT's survey of operators revealed potential damages ranging from millions to billions of baht, with some facing potential revenue losses exceeding 600 million baht annually and direct losses in the billions. Several businesses indicated that they might be forced to relocate production or even close down without government intervention.

 

IEAT chairman Yuthasak Supasorn outlined the key areas where businesses are seeking government support: exploring new markets and facilitating business matching, providing expertise on international tax and legal frameworks, offering financial aid or domestic tax incentives, and actively engaging in negotiations with the Ministries of Foreign Affairs and Commerce.

 

 

Unexpected Opportunities in Postal and E-commerce Sectors

Amidst the broader trade anxieties, Dhanant Subhadrabandhu, president of Thailand Post, identified a potential silver lining for the postal and e-commerce sectors.

 

Trump's tariff measures are reshaping import and export logistics, creating opportunities for Thailand Post to capitalise on altered shipping routes.

 

The company is planning campaigns to support these evolving transit patterns, particularly for goods originating from China.

 

Furthermore, the volume of goods purchased via e-commerce platforms is anticipated to rise, and Thailand Post is actively coordinating with major players like Temu to facilitate the delivery of online purchases through its network.

 

 

 

 

Investment Caution Expected to Persist

Dr Chatchai Tuongratanaphan, secretary-general of the Asia Pacific Retailers Federation (FARPA), anticipates a prolonged slowdown in investment until the end of the year.

 

The unpredictable nature of the shifting tariff landscape makes long-term planning exceedingly difficult.

 

He warned that if the agricultural and industrial sectors suffer, leading to reduced exports, lower production, and job losses, the resulting decline in purchasing power will create a ripple effect throughout the supply chain.

 

However, Dr Chatchai urged Thailand to view this crisis as an opportunity to fundamentally restructure its economy.

 

He advocated for reducing reliance on traditional agriculture and industry, shifting towards high-value agricultural products, embracing technology to enhance productivity, and leveraging Thailand's inherent strengths in tourism and soft power.

 

 

Government Dispatches Negotiation Team

In a proactive move, the Thai government is sending a high-level delegation, led by Deputy Prime Minister and Minister of Finance Pichai Chunhavajira and Minister of Commerce Pichai Naripthaphan, to the United States for trade negotiations.

 

Their meeting with Scott Bessent is scheduled for April 23rd.

 

Thai Trade Representative Chai Watcharong, stated that extensive consultations have been held with the Thailand team to compile crucial data ahead of these discussions.

 

Key priorities include exploring avenues for importing US goods to reduce the trade deficit in essential sectors. Initial discussions have touched upon potential US imports that could benefit Thailand, such as soybean meal and corn, where Thailand currently relies heavily on imports from other regions.

 

The delegation will also explore the possibility of increasing imports of premium US beef, given Thailand's existing reliance on foreign sources for high-grade beef.

 

The potential import of US breeding cattle to enhance the quality of domestic beef production is also on the agenda. However, Chai indicated that importing pork is not considered advisable at this time due to concerns about its impact on the domestic market.

 

This special report underscores the complex and rapidly evolving trade landscape facing Thailand. While the 90-day tariff delay offers a temporary reprieve and potential strategic advantages, significant challenges and uncertainties remain.

 

The coming weeks and months will be crucial in determining the long-term impact of these US trade policies on the Thai economy and the strategic adaptations that will ultimately shape its future.