Grim outlook for exports as trade war escalates

By PHUWIT LIMVIPHUWAT 
THE NATION

 

File photo: Thailand port

 

Trump frazzles nerves with gamesmanship as tough negotiations with Beijing continue.

 

EXPORTERS WILL pay a heavy price due to the escalation of the US-China trade war, which will also have a negative impact on Thailand’s economy, according to experts.

 

On Friday, the US launched a new round of tariffs on Chinese imports. That morning, President Donald Trump tweeted: “Talks with China continue in a very congenial manner – there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25 per cent on US$250 billion worth of goods and products. These massive payments go directly to the Treasury of the US.”

 

(FILES) In this file photo taken on May 9, 2019 A photo illustration shows a label inside an item of clothing reading "Made in China," in New York.// AFP PHOTO

 

The US tariffs target technological goods such as machinery parts, electrical circuits and auto parts that are manufactured in Thailand. These goods are then shipped to China, from where they are exported to the US after value addition, according to the National Economic and Social Development Council. 

 

The implementation of more tariffs could be a part of the US strategy to gain leverage in negotiations with China, Thai acting Commerce Minister Chutima Bunyapraphasara said.

 

“The increase in tariffs is a demonstration by the US that President Trump is willing to act on his threats,” said Chatree Rojana-Arpa, executive vice president for strategy and product development at KTB Securities (Thailand).

 

“President Trump wants to use this move to negotiate with China from a favourable position,” he continued. “If there is progress in the negotiations, the tariff rates will likely be brought down.”

 

This sentiment is reflected in Thailand’s capital market, which has not taken a significant hit from the trade war escalation. This is because investors are still expecting the tariffs to come down in the near future as US-China trade negotiations make progress, Chatree said. 

 

On the other hand, a drawn-out escalation of the trade war would further hamper Thailand’s exports, which have been performing poorly in 2019. 

 

In the first quarter of this year, Thai exports were valued at US$61 billion, a 1.64-per-cent contraction compared to the same period last year. 

 

In 2018, Thai exports grew by 6.7 per cent year on year. As a result of the trade war escalation, various financial institutions have cut their export forecasts for 2019 to less than half of last year’s growth. 

 

“If US-China trade tensions continue to escalate, Thai export growth for 2019 is likely to be lower than our recent forecast of 2.7 per cent,” said Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre.

 

Sustained suffering

 

In particular, goods in the supply chain affected by the trade war, such as computers and parts, integrated circuits and rubber, have already shown a year-on-year contraction of 25.5, 28.8 and 18.2 per cent, |respectively, in the first quarter of this year, he said. 

 

In terms of investments, a drawn-out trade war would not benefit Thailand, either. If it continues, the global and regional supply chain may be disrupted, causing a net negative in investments for Thailand, Yunyong claimed. Krungthai Bank’s Global Business Development and Strategy Group predicted that Thailand’s export growth could be belowtwo per cent in 2019 as a result of the trade war escalation. 

 

Moreover, Thailand does not stand to benefit in terms of investment resulting from an escalation of the trade war. Most international manufacturers have already set up bases in various countries across Asia. 

 

Hence, they may simply start to produce more at their production bases outside China, according to Phacharaphot Nuntramas, senior vice president of the Global Business Development and Strategy Group.

 

Yunyong suggested that Thai exporters seek alternative markets to diversify their destinations.

 

“And they should also seek opportunities to benefit from substituting Chinese exports to US markets as well as US exports to China’s markets. These products include agricultural goods and auto parts for US markets and processed food, copper and hard-disk drives for China,” he said. 

 

The Commerce Minister said Thailand would gear its trade negotiations to open up more tariff-free opportunities for Thai exporters.

 

Source: http://www.nationmultimedia.com/detail/business/30369254

 

-- © Copyright The Nation 2019-05-13

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A Trump negotiating tactic may lead to serious beggar thy neighbour policies ... but I suspect he’ll find a face saving agreement and hail it a great success. Next book: “Art of the Con”.

Of course the drastic drop in exports (and tourism revenue) is everybody's fault, except the artificially inflated Thai Bhat that is far to overrated....make the thai Bhat exchange to say 1 US$ = 37 THB and promise, your exports will soar overnight....

42 minutes ago, observer90210 said:

Bhat exchange to say 1 US$ = 37 THB and promise, your exports will soar overnight....

If they weaken Baht, lots of countries including USA will punish Thai export with punitive tariffs. It is a catch 22 scenario. The only way to escape from it is automation, improving labor productivity, and labor skills, etc.Thailand severely lacks in these areas. 

Edited May 12, 20197 yr by onera1961

There you have it the predictable real and awkward anti face story.

To follow the we won't be affected face story from just the other day. 

Doubtfully, the demand for elephants will rise.....

Malarkey.  Meanwhile VN and INdo are exporting more than ever to the USA / EU.   It's poor management and foresight from many actors.  

 

 

 

 

 

 

2 hours ago, Oziex1 said:

There you have it the predictable real and awkward anti face story.

To follow the we won't be affected face story from just the other day. 

I guess the latter was written by the spin doctors of the TAT...

Oh so classic "Thai" reporting

 

Yesterday's headline was...

US-China trade row won’t hurt Thai exporters

 

????

 

5 hours ago, webfact said:

as Tariffs are NOW being paid to the United States by China of 25 per cent on US$250 billion worth of goods and products. These massive payments go directly to the Treasury of the US.”

BS ! It is not China who pays the tariffs , it is the IMPORTERS of chinese goods who pay when their ordered chinese merchandise arrives in the US . That means that they will have to raise the prices for their imported stuff and the american consumer will pay it .

Naturally there is no mention of the high baht and how that might have an effect on Thai exports. 

5 hours ago, webfact said:

Moreover, Thailand does not stand to benefit in terms of investment resulting from an escalation of the trade war. Most international manufacturers have already set up bases in various countries across Asia. 

A very relevant comment. Vietnam and Malaysia have benefited greatly from the trade war with manufacturers relocating to these countries.

In fact Vietnam is just about at saturation point with the influx of new factories and manufacturing companies. So much so that Cambodia and Laos are now having some appeal; but alas very few of them seem attracted to Thailand. Perhaps low productivity, or Article 44, or an irrational junta, or the high baht or a potentially unstable mishmash of a government has frightened them away. Whatever the reasons Thailand loses.

After nearly 5 years of junta rule the economic future for Thailand is growing bleaker.

 

 

 

 

 

 

 

 

7

15 minutes ago, nobodysfriend said:

BS ! It is not China who pays the tariffs , it is the IMPORTERS of chinese goods who pay when their ordered chinese merchandise arrives in the US . That means that they will have to raise the prices for their imported stuff and the american consumer will pay it .

One reason tariffs are unlikely to hurt U.S. consumers is that trade with China accounts for a very small fraction of U.S. spending.  According to a recent study by an economist at the San Francisco Fed, imports make up around 11 percent of the $14.3 trillion of consumer spending in the U.S. Imports from China account for 16% of that, which translates into 1.76 percent of consumer spending.

Last week the headline was "US/China trade war won't affect Thailand"

6 hours ago, webfact said:

Grim outlook for exports as trade war escalates

The exact reason why Prayut the General should not be the PM. His honeymoon years are over and we need a PM with the competency and vision to navigate this tough economic situation.  

Trump fans believe he was a “great businessman”. Since Trumpsters do not do much outside reading, they fail to realized Trump Corp. filed bankruptcy six times, his business ventures such as Trump steaks, Trump Vodka, Trump Airlines, Trump Ice ( bottled water), Trump Network, New Jersey Generals ( football team), Trump Magazine, Trump’s “The Game” by Milton Bradley, Trump Casinos. And the greatest con artist on earth has lost over a Billion $$$ during a ten year period -1985-1994; thus, he avoided paying taxes. Trump is totally incompetent as a businessman or world leader. The upswing of USA’s economy started over 10 years ago with Obama inheriting the financial bank crisis from Bush ( Research this) Yet, the Trump supporters who only watch Fox Propaganda News will think this imposter walks on water ( including the evangelical community that are racists). The American farmer , who are Trump supporters, no longer can depend on exporting their soy beans, corn, & pork to Asian countries. USA farmers can barely exist due to Trump’s poor business decisions. This is a sad regime that has taken over America. 

Funny, as just a couple of weeks ago the Ministry of Commerce vehemently insisted the US-China trade war would not affect the kingdom in the slightest. I guess whoever blabbered that out wasn't aware (as incompetent people occupying high government positions often are) that a large proportion of Thailand's consumer products industries is actually financed and controlled by Chinese companies. Perhaps Thailand shouldn't have put all its eggs in the "China basket," huh? As the old saying goes: "You were caught with them, now you'll hang with them."

6 hours ago, webfact said:

Yunyong suggested that Thai exporters seek alternative markets to diversify their destinations.

Yellowboat suggests allowing more foreign trade into the country and scrap some of the looniest import tariffs known to man.  Thus offering something to the angry man in the White House.     If the Thai 1% was too lazy to develop other markets in the first place, then shame on them.  They deserve failure.  Keeping the super rich because they are super rich is not fair or good for Thailand. 

Trump not going to get China to back down with his "gunboat diplomacy'; a historic reference to the British empire forcing China to cede Hong Kong. China has worn this shame for a long time and is now a super power and will never concede to Trump's bully tactics. They know that this trade war is a part of the grand plan to undermine China's unstoppable trajectory to eclipse USA to become a technology super power. At the heart of it is that China is racing ahead in AI technology which will determine the future of both countries. 

7 hours ago, webfact said:

Tariffs are NOW being paid to the United States by China of 25 per cent on US$250 billion worth of goods and products. These massive payments go directly to the Treasury of the US.”

I know he doesn't listen to his subordinates but it would be nice if somebody could make this unqualified POTUS understand that it is the American consumers who ultimately pay the hefty tariffs, not China.

To keep repeating this lie, he makes himself look stupider than stupid (if that is possible).

44 minutes ago, Eric Loh said:

They know that this trade war is a part of the grand plan to undermine China's unstoppable trajectory to eclipse USA to become a technology super power.

it is also intended more basically to undermine a Communist-led government, in effect creating a regime change that would impact, if not end, Xi's leadership and power of the politburo.

Is it a wonder then that the Chinese government refused Trump's final trade agreement? The US would have done the same if the Chinese insisted that the US must abandon its free capital market that is one of the tenants of democracy.

1 hour ago, toenail said:

Trump fans believe he was a “great businessman”. Since Trumpsters do not do much outside reading, they fail to realized Trump Corp. filed bankruptcy six times, his business ventures such as Trump steaks, Trump Vodka, Trump Airlines, Trump Ice ( bottled water), Trump Network, New Jersey Generals ( football team), Trump Magazine, Trump’s “The Game” by Milton Bradley, Trump Casinos. And the greatest con artist on earth has lost over a Billion $$$ during a ten year period -1985-1994; thus, he avoided paying taxes. Trump is totally incompetent as a businessman or world leader. The upswing of USA’s economy started over 10 years ago with Obama inheriting the financial bank crisis from Bush ( Research this) Yet, the Trump supporters who only watch Fox Propaganda News will think this imposter walks on water ( including the evangelical community that are racists). The American farmer , who are Trump supporters, no longer can depend on exporting their soy beans, corn, & pork to Asian countries. USA farmers can barely exist due to Trump’s poor business decisions. This is a sad regime that has taken over America. 

What Trump's alleged failings have to do with the Thai economy is a debatable subject. But thank you for your enlightenment anyway even though you offer no supportive evidence. You also introduce another irrelevancy into your debate by offering up Obama as a comparison and talk glowingly of the Obama "upswings". So on the same basis I offer to you the evidence of both Obama "upswings" and "downswings". 

1 hour ago, toenail said:

Trump fans believe he was a “great businessman”. Since Trumpsters do not do much outside reading, they fail to realized Trump Corp. filed bankruptcy six times, his business ventures such as Trump steaks, Trump Vodka, Trump Airlines, Trump Ice ( bottled water), Trump Network, New Jersey Generals ( football team), Trump Magazine, Trump’s “The Game” by Milton Bradley, Trump Casinos. And the greatest con artist on earth has lost over a Billion $$$ during a ten year period -1985-1994; thus, he avoided paying taxes. Trump is totally incompetent as a businessman or world leader. The upswing of USA’s economy started over 10 years ago with Obama inheriting the financial bank crisis from Bush ( Research this) Yet, the Trump supporters who only watch Fox Propaganda News will think this imposter walks on water ( including the evangelical community that are racists). The American farmer , who are Trump supporters, no longer can depend on exporting their soy beans, corn, & pork to Asian countries. USA farmers can barely exist due to Trump’s poor business decisions. This is a sad regime that has taken over America. 

     All what you have said is true nevertheless he was voted in lawfully although he didn't get the most votes. What do we have here in Thailand, an illegal Junta Gov. that took power at the point of a gun. In 18 months time the American voters will have the opportunity to vote Trump out whereas Thailand has had five years of poor economic management and God alone knows if or when this country can rid itself of the incompetent, corrupt crowd in power at present despite the phony election.

Another lie of DT: "... as Tariffs are NOW being paid to the United States by China of 25 per cent on US$250 billion worth of goods and products."

Not true.

Tariffs are paid by the American importers.... 

Not quite the same!

Wishful thinking by Mr Longcut there.

 

1.76% of $14.3tn is $256bn. That's how much consumer spending will be affected.

 

Co-incidentally $14.3tn is about the same as the American national debt............

3 hours ago, Eric Loh said:

The exact reason why Prayut the General should not be the PM. His honeymoon years are over and we need a PM with the competency and vision to navigate this tough economic situation.  

Where will you find one of them in Thailand now that the election is over?

2 hours ago, Eric Loh said:

Trump not going to get China to back down with his "gunboat diplomacy'; a historic reference to the British empire forcing China to cede Hong Kong. China has worn this shame for a long time and is now a super power and will never concede to Trump's bully tactics. They know that this trade war is a part of the grand plan to undermine China's unstoppable trajectory to eclipse USA to become a technology super power. At the heart of it is that China is racing ahead in AI technology which will determine the future of both countries. 

Disagree, and it sounds like your opinions have been co-opted by the Borg.

Surprising as many of your posts indicate a fairly balanced view.

 

The Chinese have already backed down multiple times -- from their perspective.

They have little retaliatory leverage -- mostly because they have no useful allies (other than Russia).

In other words, nobody likes them.

 

The trade war is not a grand plan to undermine China's rise.

It is, however, a grand plan to undermine their lying, cheating and stealing everything they can.

Surely you are aware of their industrial, pervasive policies to play by their own rules?

 

The net result of the trade war is that many global businesses have already started and will continue to escalate their move out of China and disentaglement with the Chinese economy. 

This is what will squash much of the Chinese ambitions.

US political parties are ALL united on fighting China, so China can't rely on the 4 or 8 year election cycles.

It will be another entire generation 20-30 years before Americans trust the Chinese, and hopefully longer as they are demonstrably, consistently untrustworthy.

Edited May 13, 20197 yr by Fex Bluse

2 hours ago, neeray said:

I know he doesn't listen to his subordinates but it would be nice if somebody could make this unqualified POTUS understand that it is the American consumers who ultimately pay the hefty tariffs, not China.

To keep repeating this lie, he makes himself look stupider than stupid (if that is possible).

I don't like Trump, and don't really care about American politics.

 

However, both countries pay a price.

 

The price that China pays ultimately is strategically significant as American (and other foreign) companies simply exit the Chinese market for others.  

 

It's not as simply as just the tariffs alone.

That's just an excuse .. Thai exports are expensive, and so the consumer has decided to buy elsewhere. For example in many parts of EU they buy Prawns from Vietnam instead of Thailand. Same product, but just cheaper.

1 hour ago, billd766 said:

Where will you find one of them in Thailand now that the election is over?

Hoping he will find time to retrospect his conduct and decide he take solace in a wat and announced he is not taking the self anointed post. He will also surrender himself to the military court on treason charges. 

Experts, typical.  This is a golden opportunity for Thailand to increase exports to the US to undercut the prices of Chinese good that will now not be price competitive.  Exporters can build a customer base and government can work to get a favorable/mor favorable trade agreement in place.  

 

In in regard to ‘controlling’ the exchange rate.  All are no doubt aware that the Baht is not a reserve currency.  So the ability of the Bank of Thailand to ‘control’ is minimal.  They mainly have interest rates and that is a slippery slope and a limited ability to intervene if things get out of control.  Allowing the Baht to depreciate through lower interest rates will push up inflation as all imports are in dollars.  It’s not like anybody outside of Thailand would be willing to hold Baht.

 

Better that Thai exporters get off their backsides and hunt down new customers in the US while the getting is good and before the Vietnamese snap them all up.