Prolonged Trade War Bites: Private Sector Halts Investment as Exports Slow

Prolonged Trade War Bites: Private Sector Halts Investment as Exports Slow

Overview: The prolonged and seemingly endless trade war between major global powers has clearly impacted Thailand's export and investment sectors in the second quarter of 2025. This situation has pushed most entrepreneurs and investors into a "wait and see" mode as they await a clearer assessment of the situation and policy directions from both domestic and international fronts.

Key Issues:

1. Continuous Export Slowdown The latest export figures from the Ministry of Commerce (data as of the end of May 2025) show lower-than-expected expansion, with only slight growth compared to the same period last year. The clear impacts are:

Declining Purchase Orders: Products in the electronics, automotive parts, and processed agricultural goods sectors have been affected by a drop in orders from key trading partners involved in the trade war.

Decreased Buyer Confidence: Global economic uncertainty has led overseas buyers to delay purchasing decisions and reduce their inventory levels.

2. Business Sector Delays New Investments The Federation of Thai Industries (FTI) and the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) have expressed concern over the declining Industrial Confidence Index. They state that many business operators have chosen to postpone plans for factory expansion and new machinery imports due to:

Demand Risk: The inability to forecast medium- to long-term market demand.

Volatile Costs: Fluctuations in exchange rates and raw material prices, linked to the global situation, make cost and profit assessments difficult.

3. Foreign Investors Adjust Portfolios The capital market has been affected by declining foreign investor confidence, leading to a sell-off of risky assets in favor of safer havens. Analysts believe that as long as the trade war situation remains uncertain, the capital market will continue to experience high volatility.

Recommendations from the Private Sector: The JSCCIB has proposed that the government accelerate Free Trade Agreement (FTA) negotiations with new markets, such as the European Union (EU) and the United Kingdom (UK), to diversify risks and reduce reliance on traditional export markets. They also called for additional domestic economic stimulus measures to support purchasing power and help the business sector navigate this period of uncertainty.

Conclusion: The "wait and see" stance of the Thai business sector is likely to continue for some time, pending signs of a global economic recovery or greater clarity on the impacts of the trade war. This has become the number one risk factor pressuring Thailand's economic growth in 2025.