Global: Despite trade truce, US tariff inception pressures global growth
Amid trade policy uncertainty, IMF sees 'reference forecast' of 2.8% for 2025 global GDP and 1.8% for Thai GDP, based on data as of April 4 and assumption of US imposing reciprocal tariffs
On 22 April 2025, the IMF released the World Economic Outlook under its “reference forecast” (not the baseline projection), based on the data as of April 4 or the US’s plan to impose reciprocal tariffs from April 9 (while the 90-day tariff pause was announced on April 9). The IMF expected the global GDP growth to be 2.8% for 2025 and 3% for 2026, compared to 3.3% in the previous forecast for both. The downgrade spans nearly all countries, driven by the direct impact of new trade measures and their spillover effects through global trade links, rising uncertainty, and weakening sentiment. Short-term impacts vary by country, depending on trade ties, industry structures, policy responses, and trade diversification. In some regions, such as China and the euro area, fiscal support helps cushion the blow.
At pivotal moment for global economy, fading front-loaded manufacturing demand, slowing services sector, and higher tariffs threaten growth outlook
US: Trade talks ease recession fears, but economic slowdown signals mount amid tariff pressures; Fed expected to take wait-and-see stance before potential rate cuts in 2H25
Trump’s tariffs trigger global “scenario-ception” of risks and uncertainties, led by US economic losses; negotiation needed to limit fallout
Previous Scenario: The US imposes a 10% tariff on most countries and a 145% tariff on China. China retaliates with a 125% tariff on US goods.
Reference Scenario: The US imposes a 10% tariff on most countries and a 30% tariff on China. China retaliates with a 10% tariff on US goods.
Alternative Scenario: The US imposes the announced reciprocal tariffs on many countries and a 54% tariff on China. China retaliates with a 34% tariff on US goods.
Eurozone: US tariff threats, flood of Chinese goods, and slowing economic growth may prompt further ECB rate cuts
Japan: Trade uncertainty weighs on growth outlook even as services strengthen; BOJ likely to remain cautious
China: Temporary trade ceasefire provides some relief, but trade war could still weigh on growth; government retains fiscal policy space to mitigate further escalation
Thailand: Mounting risks from a scenario-ception of trade tensions and domestic headwinds
-
Thailand's economic prospect presents a complex scenario, transitioning from a period of record-high exports to facing significant challenges stemming from escalating global trade tensions and domestic economic pressures.
-
1Q25 GDP data and 2025 outlook: 1Q25 Thai GDP grew 3.1% YoY, showing a slightly slower momentum. Exports and public investment drove growth amid weak private consumption and investment, while Tariff impacts were still pending. Krungsri Research preliminarily projects 2025 GDP growth at 2.0–2.2% based on current tariffs and 1.3-1.6% in the case of high reciprocal tariffs.
-
A scenario-ception of trade tensions:
-
Despite the current trade truce, Trump’s tariffs still pose a risk to global economic growth, with the US and China bearing the biggest losses. Thailand and other ASEAN countries could face heightened pressure on GDP and export performance if the US imposes high reciprocal tariffs.
-
In Thailand, while some sectors may benefit from trade diversion and substitution effects, the majority of key industries would experience long-term losses due to elevated tariffs and an influx of Chinese imports. The impact on each industry is influenced not only by external demand, but also by its price elasticity, competitiveness, and relative tariff levels.
-
Although Thai exports hit a record high in March, US tariff uncertainties still cloud the outlook.
-
Flood of Chinese goods and implications for the Thai economy:
-
Thailand is facing growing challenges from a surge in Chinese imports, amid already weak domestic manufacturing. Domestic industries face risks of competitiveness loss, export re-routing, and weak growth.
-
Looking ahead, tariff hikes are expected to further accelerate the Thai imports of Chinese goods, potentially increasing by 6.6% from the baseline, placing additional strain on Thailand’s fragile manufacturing sector. Struggling industries are likely to deteriorate further, while even growing sectors may lose momentum. Foreign-dominated industries may see some gains, but the benefit to the Thai economy remains limited.
-
Domestic economic challenges: Tourism recovery has stalled, private investment weakness is spreading, and private consumption faces increasing headwinds.
-
Policy interest rate: Mounting downside risks prompted the MPC to cut rates. Further easing is likely, with the size and pace depending on negotiation progress and the effectiveness of domestic economic policies.
1Q25 GDP grew 3.1% YoY; exports and public investment drove growth amid weak private consumption and investment; pressures mount amid tariff policy and structural constraints
2025 GDP Outlook: preliminarily projected at 2.0–2.2% with current tariffs, 1.3–1.6% under escalating trade tensions — a scenario-ception driven by tariff risks
Krungsri Research preliminarily projects Thailand’s 2025 GDP growth at a range of 2.0-2.2% in our reference scenario, assuming the current 10% tariff levels imposed by the US, while our alternative scenario with high reciprocal tariffs could see growth at 1.3-1.6%. Krungsri Research views escalating tariff risks as a key catalyst in a broader “scenario-ception,” where external shocks interact with domestic vulnerabilities—such as structural constraints, weak policy execution, and a slow tourism recovery. This convergence of risks reinforces each other, making downside risks to growth not only likely but structurally embedded.
Under Trump’s second presidency, a series of tariff hikes has intensified the trade war, with both the US and China currently under a 90-day trade truce
Trump’s tariffs pose risk to global growth, with US and China bearing the biggest losses; Thailand could face heightened economic pressure if US imposes high reciprocal tariffs
Reference scenario: US imposes a 10% tariff on most countries and a 30% tariff on China. China imposes a 10% tariff on US goods.
Alternative scenario: US imposes the previously announced reciprocal tariffs on many countries and a 54% tariff on China. China imposes a 34% tariff on US goods.
Some sectors may benefit from trade diversion and substitution effects, majority of industries will face long-term losses due to elevated tariffs and influx of Chinese goods
The impact on each industry is influenced not only by external demand, but also by its price elasticity, competitiveness, and relative tariff levels.
Reference scenario: US imposes a 10% tariff on most countries and a 30% tariff on China. China imposes a 10% tariff on US goods.
Alternative scenario: US imposes the announced reciprocal tariffs on many countries and a 54% tariff on China. China imposes a 34% tariff on US goods.
Though Thai exports hit a record high in March, uncertainties surrounding US tariffs threaten the outlook
Strong 1Q25 export growth may be short-lived amid global trade headwinds
In the first quarter of 2025, Thai exports grew 15.2% YoY (based on MOC data), led by Industrial products, which expanded by 19.4% (including computers & components, plastic products, and electrical appliances), agro-industrial products which expanded by 2.0% (such as pet food and canned tuna). However, exports of agricultural products decreased by
-1.4%, led by rice and cassava products. Also, exports of cars and parts continued to contract. The impending US tariff hikes present a major downside risk. Thai exporters front-loaded shipments ahead of the tariffs, but this short-term boost may fade. The WTO now projects a 0.2% decline in global trade for 2025, reversing its earlier 3.0% growth forecast—largely due to escalating US tariffs and rising US-China trade tensions, which could disrupt Thai trade and increase economic uncertainty.
Thailand facing increasing challenges from influx of Chinese goods amid weak domestic manufacturing production
For years, Thailand has been wary of an influx of Chinese goods, driven by China’s persistent excess supply in the manufacturing sectors, which worsened following COVID-19, as well as China’s diversion of exports from the US to other partners, especially ASEAN, due to the US tariff hikes during Trump’s first presidency. The share of Thai imports from China surged from 20.0% in 2017 to 26.2% in 2024. This surge in Chinese goods has intensified competition for Thai businesses in both domestic and international markets. The escalating U.S.-China trade war could further accelerate the inflow of Chinese products into Thailand. Since 2017, Thai imports from China have accelerated markedly relative to Thailand’s overall exports, while domestic manufacturing production has remained largely stagnant, raising concerns over the sustainability of the country’s economic growth.
Domestic industries face risks of competitiveness loss, export re-routing, and weak growth
Tariff impact is expected to further increase Thai imports of Chinese goods (+6.6%), worsening already-fragile manufacturing sectors
Since mid-May 2025, the US has imposed 30% tariffs on all Chinese goods, the China has imposed 10% tariffs on all US goods. As of April 28, the 10% baseline reciprocal tariffs remain in effect across the board (excl. Canada and Mexico), along with 25% tariffs on steel, aluminum, and automobile imports from all countries. In this scenario, China’s export share to the US could decline to only 7.3% in the long run, leading to a substantial trade diversion to other trading partners, especially ASEAN. Thus, Thailand’s current influx of Chinese goods could exacerbate. According to our analysis, Thailand’s Imports from China could increase from the baseline by 6.6%, USD 5.3 bn, causing Thailand’s share of imports from China to increase from 26.2% in 2024 to 27.8% in the long run. This further influx of Chinese goods would aggravate manufacturing sectors with currently weak competitiveness.
Tariff impact: Struggling sectors likely to decline further, growing sectors to lose momentum, and foreign-dominated sectors to offer limited gains for Thailand
The tariff-induced influx of Chinese goods will continue to weaken struggling sectors, particularly Textiles, Leather, and Footwear. Additionally, sectors that saw positive growth during 2020-2023, such as Food and Beverages, are expected to shift toward negative growth. While Motor Vehicles & Transport Equipment may see some long-term growth, gains for Thai manufacturers would likely be limited due to the rerouting of Chinese goods and high foreign ownership rates in this industries (73%). With the dual risks of US tariffs on Thailand and the tariff-induced influx of Chinese goods, Thai businesses will face greater risks, and workers in declining sectors may suffer income losses or layoffs. Thus, the Thai government should not only reach a trade agreement with the US but also take additional actions to mitigate the risks from an influx of Chinese goods.
Tourism recovery stalls as Chinese arrivals fall to only 41% of pre-Covid level
In April 2025, Thailand welcomed 2.55 mn foreign tourists, the lowest in six months and a -7.6% YoY decline, compared to 2.72 mn in March. During January-April, total foreign tourist arrivals reached 12.1 mn (-0.3% YoY), generating THB577 bn (+5.2%) in revenue, driven by expansion in tourist spending from long-haul markets such as Europe, the Middle East, and the US. The tourism recovery remains weak and may provide only limited support to the Thai economy this year. Notably, Chinese tourist arrivals plunged due to safety concerns and rising competition from regional peers. In April, only 317,213 Chinese tourists visited Thailand (-46.7% YoY), bringing the four-month total to 1.65 mn (-29.9% YoY), just 41% of pre-COVID levels.
Private investment weakness broadens, reflecting softer economic outlook in 2025
In March, the Private Investment Index contracted by -2.9% YoY and declined by -1.0% MoM sa. Investment across all categories continued to decrease, including machinery and equipment, automobiles, and construction. This occurred amid a sharp decline in business sentiment in April, particularly the expected BSI in the next 3 months, which fell to its lowest level in 44 months—since August 2021—indicating heightened private sector concerns over the short- to medium-term economic outlook. The private investment for the remainder of this year would remain weak, especially in export-related sectors, which could be adversely affected by the US import tariff hikes.
BOI Investment applications jump 97% in Q1, yet certificate issuance signals investor caution
In the first quarter of this year, the Board of Investment (BOI) received applications for investment incentives for 822 projects (+20% YoY) with a total investment value of THB431 bn (+97% YoY). The three industries with the highest investments were Digital, Electrical & Electronics and Machinery & Vehicle. Foreign direct investment (FDI) applications for BOI incentives rose by 43% to 618 projects valued at THB268 bn (+62%), led by Hong Kong, China and Singapore. Meanwhile, the BOI has approved 647 projects with a total investment value of THB 256.93 bn (+107% YoY). This is a promising sign for domestic investment in key industrial sectors over the next 1-2 years. However, the number of promoted certificates—closely linked to actual investment—stood at 660 projects (+2%) with a total value of THB237 bn (-7.8%). This may reflect weak investment momentum in Thailand, as investors could be holding off on decisions pending greater clarity on U.S. import tariff policies.
Government spending continues to support economy, but with disbursement rate of capital budget at only 29% in the first 7 months of FY2025
Preliminary data from the Ministry of Finance showed that disbursement of the current budget decreased by -26% YoY in March and disbursement of the capital budget increased by 64%. In the first seven months of FY2025 (October 2024 to April 2025), disbursement of the current budget increased 14.1% YoY to THB 1.91 trn, accounting for 68.7% of the annual budget. For the capital budget, the government’s disbursement surged by 144% YoY to THB 0.28 trn, accounting for only 29.3% of the annual budget. In addition, the recent impact of US import tariff hikes may prompt the Thai government to reconsider reallocating the THB 157 bn digital wallet budget to other projects to cushion the effects.
Private consumption grows modestly in March but faces mounting challenges ahead
In March, the private consumption index (PCI) grew by 3.4% YoY, driven mainly by growth in the services sector. Meanwhile, spending on durable and semi-durable goods recorded only slight gains, and consumption of non-durable goods continued to decline. Looking ahead, private consumption is expected to face mounting headwinds, including: (i) a continued drop in consumer confidence, which has fallen to a seven-month low; (ii) downside risks to the Thai economy stemming from uncertainty over US import tariff hikes; (iii) a slowdown in farm income due to falling agricultural prices; and (iv) persistently high levels of household debt.
Soft inflation outlook deepens as April turns negative, Q2 seen below target range
Mounting downside risks prompted MPC to cut rates; Further easing is likely, with the size and pace depending on negotiation progress and domestic policy effectiveness