SHORTLY after the imposition of the first round to tariffs, the US released a list of US$200 billion in additional targeted imports from China, causing countries including Thailand to worry about the spilled over effect. But in the case of Thailand, the effect on her exports and economic growth rates are estimated to be quite limited.
There is still hope that there would be resumption of talks between US President Donald Trump and Chinese President Xi Jinping in order to limit damages that are to cause their respective economies and people.
Analysts believed what President Trump has done with respect to tariffs against China and Europe is what he has to do to fulfill the election campaign promise and once the mid-term election in the US in November is over, things should get better although some might caution that no one should underestimate President Trump.
An analyst said in the short term, the US might seem to have an upper hand as the imports from China are huge compared to the amount of the US exports to China, but China does have other counter measures the US might have to beware of.
China is the US’s biggest creditor holding huge amount of the US Treasury bonds and it’s possible that if worse comes to worst, China could dump the bonds causing chaos in the US financial markets.
China can also resort to unofficial counter measures like asking Chinese people to avoid the US as their travel destination as once it did to South Korea when South Korea allowed the US to install anti-missile system on its soil.
As to the trade war effect on Thailand, a research house at TISCO said the latest tariff plan on $200 billion in Chinese imports will not go into effect immediately. Instead, it will undergo a two-month review process, with hearings scheduled on August 20-23 and a final comment deadline on August 30. Thus the implementation of the $200 billion list is unlikely to happen until September at the earliest.
The first round of the $50 billion tariff list went through the same review process. During the process, US$16 billion worth of processed products were challenged and had to be replaced by other products. The $16 billion in new products had to go through another round of the review process, resulting in only a partial implementation of the initial US$50 billion list.
The US$200 billion list will face even stiffer opposition, it said adding that the list, covering more than 6,000 products, is much more extensive than the previous one. And unlike the first round, which intentionally left out consumer goods, the latest list includes many final products such as furniture, refrigerators, and air-conditioners. Some of these products are very difficult to source from other countries. For example, furniture, leather goods, and TVs and monitors, are products in which China’s market share among US imports is high. Import tariffs on these products will likely be passed on to consumers. Consequently, more products will be challenged during the review process and full implementation of the list is unlikely.
All considered, TISCO expected the overall impact of the full-fledged US-China trade war, both direct and indirect, on the Thai economy to be quite manageable (1.2% of exports and 0.3% of GDP in total). GDP growth is expected to remain strong over the rest of the year as recovery in domestic consumption and investment in infrastructure projects should more than offset the adverse impact from the global trade spat.
But if the tariff is limited only on the first round of $50 billion, the direct impact on Thailand would be very limited as the four products subject to US import tariffs only added up to $885 million or 0.37% of Thailand’s total exports in 2017. Factoring in the value-added to Thai GDP in the production of these products, the potential impact on GDP will be at most 0.1% while the indirect impact will be on exports totaling $590 million or 0.25% of Thailand’s total exports. Factoring in the value-added portion of these products, the potential impact will be at most 0.06% of GDP.
As to the estimated impact of the newly proposed $200 billion list, the potential impact would be 0.6% on exports, and 0.16% on GDP.
Top: US-China trade war graphic by CNN Money.
In-text: A CNN Money graphic showing US President Donald Trump and Chinese President Xi Jinping.
By Kowit Sanandang