Chinese imports putting four major Thai industries at risk
With costs for Thai businesses continuing to rise, an economist urges government to introduce tariffs on cheap Chinese imports
With just two months to go until the US presidential election, an analyst is warning that no matter who wins, the trade war between the US and China is certain to continue. However, if Donald Trump comes out on top, the impact on Thailand will be more severe, says Phiphat Luangnaruemitchai, chief economist at KKP Research, Kiatnakin Phatra Securities (KKP).
“The likelihood of increased tariffs on China is quite high. This would make Thailand a transit route for trade, and as China's economy weakens and domestic trade declines, cheap Chinese goods will be exported to many countries, including Thailand,” Phiphat said.
The impact of Chinese imports is already being felt. “China has used Thailand as a trading hub, and the slowdown in China's economy has resulted in an influx of cheap Chinese goods into Thailand. This has intensified competition and weakened the competitiveness of Thai businesses,” he added,
In the first six months of this year alone, the trade deficit with China reached $30 billion and the trade war between the US and China has led to a decline in global trade volumes, which in turn has reduced Thailand's trade opportunities while increasing costs for Thai businesses.
The impact of China’s economic situation is particularly concerning for four major Thai industries: steel, automobiles, hard disk drives, and petrochemicals, all of which are traditional industries. The costs for Thai businesses are rising, and they face competitive disadvantages, especially as challenges become more evident in the electric vehicle (EV) and petrochemical sectors.
Given that Thailand's key industries remain traditional, coupled with the fact that industrial production and trade volumes have not fully recovered, the overall Thai economy is trapped in low growth. This situation indirectly impacts the earnings outlook for Thai listed companies, which have seen declining profits.
Moreover, with no significant capital investment in new industries, corporate earnings in Thailand have stagnated over the past decade, leading to a lack of growth in the Thai stock market.
Phiphat recommended that the government impose tariffs on Chinese imports that are deliberately priced below production costs and ensure that the quality of Chinese products meets the same standards as Thai goods.
There should also be efforts to promote investment by attracting foreign capital, and preparing the workforce to support new industries to address labour shortages. The government should address regulatory issues to reduce restrictions on foreign investment and ensure political stability within the country. And Thai businesses must adapt by investing in new innovations to shift toward competing with higher-quality production and products, he said.
