Don't let politics mask economic woes

As if economic problems in Thailand are not bad enough, political issues add to the complications. The worst is the split in the coalition. Even with an overwhelming majority of 314 (out of 493 parliamentary seats) prior to the break-up, the government could not push for many major policies, including the 10,000 baht cash handout scheme.

- Chartchai Parasuk

With a much-reduced majority and only 261 seats, I doubt this lame duck government can be effective. A few rebels could lead to the dissolution of parliament. Balancing different parties’ interests will take priority over sound policy decisions.

That is sad for Thailand because the country needs a strong and decisive government to manage numerous challenging economic issues. US President Donald Trump's reciprocal tariffs and the selection of a new Bank of Thailand (BoT) governor are just two examples.

The US decided to impose a 36% reciprocal tariff on Thai exports, taking effect from April 9. It is estimated that the new tariff rate would reduce Thai GDP growth by 1.0% or more. Fortunately, the measure was postponed for 90 days until July 9. Thailand is in negotiations with the US to lower the rate, which, in my view, will fail.

Strictly speaking, Thailand is not in negotiations with the US as there are no face-to-face talks or exchanges of information yet. As far as the public knows, only the proposal has been submitted, and the country is waiting for the US team to set the discussion date.

In my opinion, the negotiation process between the US team and the Thai team is unlikely to take place. The US simply has no time to negotiate with all 56 countries affected by Mr Trump’s reciprocal tariffs. Only “key” countries will be granted face-to-face negotiation opportunities. Thailand does not look like a key country, as half of the so-called “Products of Thailand” are not really produced by local manufacturers.

The key country in this region is China, which finished negotiations with a 55% tariff rate. That 55% tax rate comprises the 20% existing tariff and 35% in a reciprocal tariff. The original reciprocal tariff for China set on April 9 was 34%.

Basically, Mr Trump gets what he originally wanted from China, plus an agreement on lifting a rare earth mineral export ban. Good negotiating.