Thai economy at risk of sharp slowdown to 0.4% in 2026 if US tariff deal collapses

The assessment assumes that even if Thailand manages to negotiate a partial reduction in reciprocal tariffs with the United States before the August 1, 2025, deadline, the country’s tariff rates will remain higher than those of key export competitors.

Part of the resilience in early 2025 stems from front-loading of exports—where exporters accelerated shipments in anticipation of US tariff hikes. However, in the second half of the year, Thai exports are likely to face increasing pressure, as elevated reciprocal tariffs could place Thai products at a pricing disadvantage in the US market compared to those from competing countries.

Looking ahead, SCB EIC forecasts that Thailand’s GDP growth will slow further in 2026, likely expanding by just 1.2%, as both exports and private investment weaken under the continued burden of US trade barriers.

Thailand’s major export sectors face growing risks of market share erosion in the United States, particularly in electronics and electrical appliances—two industries now vulnerable to competition from countries with lower retaliatory tariffs, including ASEAN peers, Japan, and South Korea.

In addition to existing tariff challenges, Thailand may face rising risks of transhipment-related tariffs, similar to those imposed on Vietnam, which could raise trade costs further. Thai exports—especially those with high import content—may also be subject to stricter US rules of origin verification, compounding pressure on key sectors.

In a worse-case scenario where Thailand fails to secure a tariff reduction, and the United States maintains a 36% retaliatory tariff from August 1, 2025—while key competitors like Vietnam enjoy significantly lower rates (around 20%)—SCB EIC projects Thai GDP growth will decelerate to just 1.1% in 2025 and plummet to 0.4% in 2026, due to a sharp contraction in exports and private investment.

Looking ahead, the Thai government is reportedly still evaluating proposals for broader market access concessions in trade negotiations with the US, particularly in the agriculture sector, where concerns remain over the potential impact on local farmers and producers.

According to SCB EIC, agriculture and livestock industries—including pork, poultry, and maize—are among the most vulnerable if Thailand is required to open its market to US agricultural products. This is due to:

• Higher production costs in Thailand compared to US imports, even when including transport
• Heavy domestic reliance on locally produced agricultural goods, which could be disrupted by increased imports
• Widespread impact on domestic supply chains, especially on smallholder farmers facing cost disadvantages
• If agricultural liberalisation moves ahead, the government will need to implement comprehensive support measures to protect affected stakeholders and help them adjust to the new market dynamics.

Aside from trade-related uncertainty, Thailand’s economy in the latter half of 2025 faces additional pressures, including:

• Fragile tourism recovery, especially from China, which is showing only a modest rebound; global economic uncertainty and US tariffs could further dampen travel spending
• Rising tensions with Cambodia, which may have economic spillovers depending on the severity of retaliatory actions
• Political uncertainty, which could delay budget disbursement for fiscal years 2025–2026, weakening domestic economic momentum