Impact of Trump’s tariff policy becomes more evident on major global economies.
US
US economy continues to lose momentum, reinforcing expectations of Fed rate cuts in 2H25. In April, nonfarm payrolls rose by 177,000—above expectations but down from 185,000 in March. The unemployment rate held steady at 4.2%. However, job openings (JOLTS) declined to 7.19 million in March, marking the lowest level in six months.
Despite better-than-expected employment figures, other key indicators—such as consumer confidence, private consumption, manufacturing PMI, and job openings—continue to point to a clear economic slowdown. This aligns with Q1 GDP, which contracted by 0.3% QoQ annualized. The weaker growth was not only driven by front-loaded imports ahead of rising tariffs but also reflected a broader economic slowdown—particularly in consumption, which recorded its weakest growth in 7 quarters. As a result, Krungsri Research expects the Fed to begin cutting interest rates from mid-year, with rates likely falling to 3.50–3.75% by year-end to support the economy and ease financial conditions.
Japan
The Bank of Japan (BOJ) kept its key policy rate unchanged at 0.5% while lowering its economic outlook, citing rising downside risks. The BOJ revised its 2025 GDP growth forecast down from 1.1% to 0.5%, and trimmed its core inflation projection from 2.4% to 2.2%, reflecting potential headwinds from escalating US trade tensions. Nonetheless, the BOJ signaled its intention to maintain a tightening stance.
Growing pressure from US tariff hikes is likely to weigh on global trade and economic activity—impacting Japan’s manufacturing and export sectors, while a weaker yen and front-loaded exports ahead of the tariff hikes provided a temporary lift in Q1. Intensifying competition from Chinese goods, weakening external demand, and the risk of retaliatory tariffs—particularly if US tariffs revert to the initial 24% level proposed by Trump—could further strain the economy. Given these headwinds, Krungsri Research expects the BOJ to maintain its current policy rate at 0.5% in the near term, with a potential rate hike considered in the second half of the year.
China
China begins to feel trade war strain while property sector recovery stays uncertain. The NBS reported that the manufacturing PMI slipped back into a contraction, falling from 50.5 in March to 49 in April, the lowest level since December 2023. Similarly, the new export orders sub-index fell from 49 to 44.7, the weakest level in over two years. The non-manufacturing PMI also slowed from 50.8 to 50.4. Meanwhile, new home sales by the top 100 property developers continued to decline, though the pace eased from -11.4% YoY to -8.7%.
Recent economic indicators point to a slowdown in manufacturing, driven by retaliatory tariff hikes with the US—now exceeding 100%—and ongoing pressure from the property sector. Despite these headwinds, the government has not rushed into trade negotiations with the US. Instead, it has implemented targeted measures, such as waiving tariffs on selected US imports—including pharmaceuticals, microchips, and ethane—and allowing businesses to specify critical products for exemption. While US-China tensions have eased somewhat, we believe China is opting to absorb short-term economic pain to exert significant pressure on the US and gain leverage in future negotiations.
Rising risks to Thai economy increase chances of further rate cuts; scale may hinge on trade talks.
Thai economy slows in March amid weaker consumption, investment, and tourism. Several institutions cut 2025 GDP forecast to around 2%. The Bank of Thailand (BOT) reported that overall economic activity in March slowed down, mainly due to a broad-based decline in private consumption (-0.5% MoM sa), especially in the services category, which was driven by lower spending in hotels and restaurants. This trend was in line with a decline in domestic and foreign tourists. Private investment continued to contract (-1.0% MoM sa), particularly in the categories of machinery and equipment, as well as vehicles, while construction investment remained flat. Meanwhile, exports—excluding gold and after seasonal adjustment—declined slightly from the previous month (-0.2% MoM sa).
Although most economic indicators softened in March, the overall economy in 1Q25 showed signs of recovery from 4Q24. This was supported by rising government spending and accelerating exports ahead of US tariff hikes. However, the Thai economy is expected to come under greater pressure in the periods ahead, as reflected in downward revisions of GDP forecasts by key economic agencies. The Bank of Thailand (BOT) and the Fiscal Policy Office (FPO) have recently revised down their 2025 GDP projections to 2.0% and 2.1%, respectively. In addition, credit rating agency Moody’s has downgraded Thailand’s outlook from "Stable" to "Negative," citing (i) the country’s sluggish post-pandemic recovery and its low growth prospects in the long term; (ii) weakened fiscal position due to rising public debt; and (iii) heightened risks to Thailand’s export sector affected by US tariff measures.
MPC cuts policy rate to 1.75%. Further easing may depend on progress in trade negotiations. The Monetary Policy Committee (MPC) meeting on April 30 voted 5 to 2 to cut the policy rate by 25bps to 1.75%, citing Thailand's weakening economic outlook and rising downside risks stemming from uncertainty in trade policies among major economies. Its negative effects would become more apparent in 2H25. Thailand’s 2025 GDP is expected to grow 2% if trade negotiations remain prolonged and the US maintains a 10% tariff rate. However, in a more severe scenario with high US reciprocal tariff, GDP growth may slow to just 1.3%.
Aligning with the deepening downside risks to growth, downward revisions of GDP growth from 2.9% to 2.0% (Reference Scenario), and a downtrend in inflation projected below the lower bound of 1%, the MPC has cut the policy rate by 25 bps. The rate cut is seen as a preemptive move to broader economic headwinds, driven by highly uncertain US trade policies.
The Committee conveys a dovish tone with the cut, stating in the press release that “The unpredictable nature of future global trade policies of major economies continues to pose significant challenges in assessing the economic and inflation outlook going forward.” Furthermore, at the press conference, the BOT did not rule out the possibility that this could mark the beginning of an easing cycle, given the worsening outlook amid heightened uncertainty, which could persist through the end of next year.
Looking ahead, given the dovish tone in the BOT’s statement and press conference, Krungsri Research anticipates a possible follow-up rate cut in the June meeting, as prolonged uncertainty during negotiations could intensify pressure on Thailand’s trade-dependent economy. In 2H25—when the MPC expects the tariff impact to begin materializing—the rate trajectory and terminal level will depend on the progress of trade negotiations.
