Policymakers expect a more pronounced economic drag from global trade tensions in 2H25, but with high uncertainties. The BOT downgraded its 2025 and 2026 economic outlook, outlining two scenarios depending on US tariff negotiations with China and other countries hit with reciprocal tariffs on Liberation Day (see table). In our view, with the US keen to retreat from globalisation and pursue unilateralism, while correcting trade imbalances, the negotiation path between various countries and the US will be full of hurdles. The BOT’s two scenarios may underestimate the full extent of downside risks to Thai growth from the direct and indirect spillovers of US tariffs. These risks include the potential for US reciprocal tariffs to revert to their initially announced elevated rates after the 90-day pause in early July, such as at 36% for Thailand; the failure of the US and China to reach a substantial deal to lower the additional US 145% duties; and the imposition of additional US sectoral tariffs on semiconductor and pharmaceutical products that are under consideration. Thailand’s economic outlook remains fraught with heightened downside uncertainties, and we see risks that the central bank could be forced to adopt a deeper easing cycle, utilising its increasingly limited policy space.
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