Thai exports could benefit, face risks from Trump policies

Economy January 25, 2017 01:00

By Petchanet Pratruangkrai
The Nation

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US President Donald Trump’s trade policies could result in both positive impacts and risks for Thai exporters, who should hedge the exchange rate to protect themselves from uncertainty, according to a study by the Commerce Ministry’s Trade Policy and Strategy Office.

Pimchanok Vonkorpon, director-general of the office, said one positive indication was Trump’s clear announcement that the United States will leave the Trans-Pacific Partnership, of which Thailand is not a signatory, while Thai export competitiveness could improve if the Chinese yuan strengthens.

“The new US trade policy is not clear yet. However, according to a preliminary analysis, Trump’s new policy will create both advantages and challenges for Thai trade. To prepare for unexpected results, Thai exporters should hedge in order to assure their income,” Pimchanok said.

If the US imposes stringent trade measures against China, it will pressure the yuan to appreciate, and that could increase Thai trade competitiveness. Moreover, more investment from China could flood into Asean, including Thailand, as China will diversify its market after facing trade barriers in the US.

Moreover, if Trump really sticks to his promise to stimulate domestic spending, it should result in more import demand, and that could benefit Thai exports to the US market.

However, as the US has not yet announced its new measures and policies clearly, it has created uncertainty for global trading. Moreover, if the US imposes higher tariffs against imports from China, that could affect other countries as well, as the US would need to raise tariffs for all, rather than selecting only China. Otherwise, the US could be sanctioned for unfair trade practice. Under this scenario, Thai products could be hit by high tariffs as well, as the products this country exports to the US are very similar to Chinese goods.

Those goods include machinery and electrical appliances.

Pimchanok said that as many US companies had invested in the real sector or in manufacturing, they should not immediately withdraw from Thailand and other countries. However, this depends on what kind of penalties they would face for refusing to bring their investments back home.