The manufacturing sector may slow in the second half as exports are likely to fall if Thailand fails to reach an agreement with the US that lowers the proposed reciprocal tariff, warns the Federation of Thai Industries (FTI).
The 36% import duty on Thai products is slated to take effect on July 8 after a 90-day pause ends, if the two countries cannot reach an agreement to ease Thailand's trade surplus with the US.
Thai exporters are reporting greater purchase orders during the 90-day pause, but real-world demand may plunge after the tariff suspension ends, said Kriengkrai Thiennukul, chairman of the FTI.
From January to April, the export sector grew by 14% year-on-year, lifting Thai manufacturing by 0.6% as trading partners hurried to increase their stocks, he said.
SET-listed rubber auto parts manufacturer Inoue Rubber Thailand said earlier it expects an increase in revenue, driven by new purchase orders from countries eager to stockpile products as they are concerned about price changes and uncertainties after the 90-day period expires.
"If the steep tariff is eventually slapped on Thai products, it will cause a wide impact on the export and manufacturing sectors, as well as entrepreneurs' competitiveness," said Mr Kriengkrai.
The Joint Standing Committee on Commerce, Industry and Banking recently downgraded its export forecast, predicting a contraction of 0.3-0.5%, falling from an uptick of 0.3-0.9%.
The FTI expects local manufacturers will adjust their production by reducing employment. Small and medium-sized enterprises are struggling with cash flow, with some resorting to layoffs and others shuttering their businesses.