Economist: Harm from trade war not certain
Diversion and FDI shift key tactics
The Sino-US trade war may not produce a strictly negative impact on Thailand, as the country could benefit from trade diversion and a shift in foreign direct investment (FDI), says a veteran economist.
The ongoing trade war will pressure the US, China and the EU to find new sources for imports because of higher tit-for-tat tariffs and certain manufacturers, such as those producing power components, could relocate their production bases from China into Thailand, said Kirida Bhaopichitr, director of the Economic Intelligence Service at the Thailand Development Research Institute.
Sectors that could benefit from a relocation of firms from China are electronic appliances, motor vehicles and electric vehicles, IT equipment, robotics, aviation parts, energy equipment, agricultural machinery and those operating in tourism, said Ms Kirida.
“In the first three years, we may not see a major impact from the trade war if Thailand can implement trade diversions, attract FDI and export more to China,” she said.
This view is different from TMB Analytics, a research unit of TMB Bank, which projects next year economic growth and exports will be below this year’s rates, mainly because of heightening external risks.
The think tank predicts GDP will expand by 3.8% next year, with prospects dampened by indirect impacts from the Sino-US trade disputes, said Naris Sathapholdeja, head of TMB Analytics.
The trade row is expected to stifle China’s economic growth expansion next year, which will affect exports going to China, Mr Naris said.
Exports to China represent 10% of Thailand’s total exports, according to TMB Analytics.
Despite identifying the potential benefits from the trade spat, global economic growth outlook is poised to expand at a slower pace compared with this year, Ms Kirida said.
The dimmer outlook is based on China’s economic growth being affected by the trade war, but remaining over 6%, she said.
Russia and Middle Eastern countries might receive benefits from a rise in oil prices next year, said Ms Kirida.
“Both areas will be hurt as Chinese exports depend on demand from the US market more than the other way round,” she said.
“Even though China has invested more in the US than the US has in China, Chinese authorities can put pressure on US firms operating in the mainland and the Chinese government has other non-tariff measures to use against the US.”
Ms Kirida said China has been extending its influence through the One Belt, One Road initiative and has implemented the Made in China 2025 policy, both with the goal of becoming a leader in strategic industries.
For Thailand, the three external shocks warranting close monitoring are the trade war, monetary policy tightening and a rise in oil and agricultural prices, she said.