3 scenarios for Thai stocks in the wake of Vietnam's trade deal with the US
Global trade tensions are intensifying as Vietnam has reached a trade agreement with the United States, agreeing to pay a 20% import duty on direct goods and 40% on goods passing through third-party countries.
This is a significant reduction from the previous tariff of 46%. In return, the US will be able to export goods, including SUVs, to Vietnam without paying any taxes.
Vietnam's success in securing this deal has raised concerns for Thailand, especially after the negotiations between Vietnam and the US concluded on Thursday (July 3).
If Thailand’s import tariffs turn out to be higher than Vietnam’s, it could face substantial trade disadvantages in key sectors such as agriculture, clothing, footwear, textiles, and electronics—especially computers, components, and circuit boards.
Sorrabhol Virameteekul, Senior Vice President at Kasikorn Securities, told Krungthep Turakij that Vietnam’s deal was a remarkable achievement in its trade negotiations with the US, making it the third country after the UK and China to reach such an agreement.
Despite the conditions of the deal not being overly favourable, it was a crucial move for Vietnam, as it had previously faced the highest tariffs in the region at 46%, compared to China’s 30% and Thailand’s 36%.
Vietnam’s economy is heavily dependent on exports, with the US accounting for 30% of its total exports. Therefore, without this agreement, Vietnam would have suffered significant economic and GDP impacts.
The deal reduces US import tariffs and boosts US exports to Vietnam. It even allows the US to impose a 40% tariff on goods passing from China to Vietnam and then on to the US.
However, Sorrabhol said that Vietnam's stock market showed little reaction, with a modest 0.4% increase on Thursday. Meanwhile, Thailand is facing an important decision regarding US import tariffs. There are three potential scenarios for the direction of the Stock Exchange of Thailand (SET) and the economy over the next 24 hours.
Scenario 1: Delay in Negotiations
If Thailand cannot finalise its trade talks and needs to request an extension of about one month, this could happen if Thailand revisits its strategy after observing Vietnam’s deal. Such delays are not uncommon, as many countries go through multiple rounds of negotiations. In this case, the SET Index is likely to fluctuate within the range of 1,050-1,145 points throughout the month.
Scenario 2: Successful Negotiations
If Thailand succeeds in negotiating a tariff reduction of around 18-25%, based on Vietnam’s terms, Thailand’s GDP could see an uptick from 1.4% to 1.6%. The SET Index could rise from 1,145 points to approximately 1,210 points. Stocks such as DELTA, KCE, AMATA, and WHA are expected to see significant gains, making them good investment choices.
Scenario 3: Worst-Case Scenario
In the worst-case scenario, if Thailand fails to reach a deal while other countries succeed, and the import tariff increases to 36% on July 9, Thailand’s GDP growth forecast would remain at 1.4%, with no potential upside. The SET Index might decline, but the drop is expected to be limited, with a support level around 1,050 points. The market has likely already priced in this worst-case scenario, preventing further significant declines.
Sorrabhol added that Thailand should be cautious about four key sectors if Vietnam gains a competitive edge with a 20% tariff while Thailand faces a 36% tariff. These sectors include:
- Agriculture
- Clothing and footwear
- Textiles
- Electronics – computers, components, and circuit boards
The competition from Vietnam would put Thailand at a significant disadvantage, he added.
