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Trump 2.0: Implications for the Global and Thai Economies
SCB EIC assesses that the Thai economy in the short term faces increased downside risks from the Trump 2.0 policy, mainly through impacts on trade and investment.
Donald Trump has won the election as the 47th president of the United States and will return to the White House. In addition to winning the presidential election by a landslide, the Republicans of Trump’s party also hold majorities in both the House of Representatives and the Senate.
Trump has a protectionist policy that will accelerate geopolitical problems and emphasize energy security more than reducing global warming. Important policies that Trump mentioned during the campaign include:
(1) increasing import tariffs on Chinese goods by 60 pp. (percentage point) and other countries by 10 pp. (
2) blocking foreign immigration into the United States by banning and expelling illegal border crossers, restricting legal border crossings, and delaying visa approvals to enter the United States;
(3) making US allies more military-reliant by reducing US funding for defense of Ukraine, Japan, Taiwan, and South Korea;
(4) emphasizing energy security over solving climate change problems by continuing to support oil drilling; and
(5) reducing corporate and wealthy income taxes, which will cause the US government to have a fiscal deficit and more debt.
A Republican sweep election result like this will allow Trump to push through a number of policies (even though he may actually use these policies as a bargaining chip with other countries and may not fully implement them), which would have a negative impact on US trading partners and create more uncertainty for the world.
SCB EIC has analyzed the impact of Trump 2.0 policies on the global and Thai economies, using a set of US policy assumptions based on the latest analysis by the International Monetary Fund (IMF) in the World Economic Outlook (WEO) report for October 2024 to calculate the impact on the Thai economy through trade and investment channels, so that those interested can prepare to plan to cope with the impacts and uncertainties that may arise in a timely manner.
Impact on the global economy
IMF (WEO Oct24) sets Trump 2.0 policy assumptions and studies impact on global economy through 5 channels:
(1) Import tariff policy : The United States, Europe and China increase import tariffs between each other by 10 pp. and the United States collects import tariffs on goods from other countries by 10 pp. with other countries retaliating by increasing import tariffs on their goods. The affected goods cover 25% of the value of world trade, accounting for more than 6% of the value of the world economy. It will begin to have a negative impact on the world economy from mid-2025, resulting in a total decrease in the world economic growth rate of 0.3 pp. during 2025-2030.
(2) Uncertainty in global trade policy : The US import tariff policy and retaliation by other countries will cause uncertainty in trade policy, which will affect investment, especially in the industrial sector. Investment in the US and Europe will decrease by about 4% compared to the case without this Trump policy, while China and other countries will be affected by about half of the US. The global economy will be negatively affected from mid-2025 and the effects will gradually fade in 2027.
(3) Tax cut policy : The US has extended the corporate tax cuts or Tax Cuts and Jobs Act (TCJA) for another 10 years until 2034 after the previous measure expired in mid-2025, which will reduce US corporate income taxes by a total of 4% of GDP during that period. The net impact on the global economy will be positive by a total of 0.1 pp. during 2025-2030, mainly in line with the positive impact on the US economy, even though other economies will be negatively affected because they lose their ability to compete for investment compared to the US.
(4) Immigration Exclusionary Policies : The US and Europe are likely to become more exclusionary towards immigrants starting in mid-2025, resulting in a 1% and 0.75% reduction in the US and Eurozone labor force by 2030, respectively. Given that immigration has historically been a major driver of the US and European economies, it will have a combined negative impact on the global economy of 0.2 pp. over 2025-2030.
(5) Tightening of global financial conditions : Global financial conditions are likely to tighten due to the negative impact and uncertainty on the global economy and trade. US interest rates will rise in line with inflation and higher government debt in various countries, especially in the US, which will result in higher borrowing costs for government and private debt in various countries, with (1) Sovereign premiums in emerging markets (excluding China) increasing by 50 bps (basis point), (2) Corporate premiums increasing by 50 bps in China and developed countries and increasing by 100 bps in other emerging markets, and (3) Term premiums increasing by 40 bps in the US and 25 bps in the Eurozone. The impact on the global economy as a whole will be negative but will start to gradually fade in 2028.
According to the IMF study above, the global economy will start to receive negative impacts from the Trump 2.0 policy from 2025 after the policy package is gradually announced. The global economy will grow by 0.8 pp next year, and by 0.4 pp in 2026. However, the global economy will grow by 0.2 pp in 2027 compared to the case without this policy package, in line with the gradual decrease in trade policy uncertainty and low base factors .
Considering the overall impact on the global economy in the medium term, the Trump 2.0 policy package will reduce the global economic growth rate by 0.4 pp compared to the case without this policy package.
SCB EIC assesses that the impact of the Trump policy on the global economy is likely to be negative both next year and in the medium term because the world will be directly affected by protectionist measures and various volatility, while the positive impact of the TCJA tax reduction policy will occur only in the United States .
However, the impact on global inflation is still uncertain, depending on whether the net effect between supply-side inflationary pressure increases and global demand pressures slows down.
For the US economy, SCB EIC assesses that the net impact of Trump 2.0 policies on the US economy next year is likely to be negative. However, the policies are still highly unclear, depending on the net impact of differences in the timing and scale of policies that will benefit the US economy (e.g., the TCJA tax cut policy) and policies that will be detrimental to the US economy (e.g., import tariffs, immigration restrictions), as well as trade retaliatory measures from other countries. Furthermore, the policy package still has some uncertainty in terms of timing. Initially, it is estimated that these policies will gradually affect the US economy from mid-2025 .
However, the impact of Trump policies on the US economy in the medium term is quite clear that they will be negative. In addition, the Trump policy package will result in higher US inflation, which may cause the US Federal Reserve (Fed) to ease interest rates less than previously estimated, and this will further pressure the US economy.
Impact on the Thai economy
SCB EIC assesses that the Thai economy in the short term faces increased downside risks from the Trump 2.0 policy, mainly through impacts on trade and investment.
(1) Export of goods : The US’s protectionist policies and widespread import tariffs have put pressure on global trade to slow down, directly affecting Thailand’s export sector.
(1) Thai exports to the US, a major export market for Thailand, will expand less, especially for core products such as computers, electronics, and electrical appliances, due to the direct impact of the tariffs, and
(2) higher import tariffs on Chinese goods to the US market, coupled with China’s current unresolved overcapacity problem, have made it even more necessary for China to find other markets to replace them. As a result, Chinese goods tend to flood into other markets, especially Thailand, which indirectly affects Thai manufacturers to face more intense competition and further pressures the Thai manufacturing sector to recover more slowly. SCB EIC estimates that the value of Thai exports in 2025 will decrease by around 0.8-1 pp. due to the impact of the increased protectionist policies.
(3) Investment : Economic uncertainty increases due to Trump’s unclear trade policy, which may cause investment to slow down. Foreign investors tend to delay investment while waiting for clarity, so the relocation of production bases to Thailand may not happen in the short term or may happen slowly. In addition, the risk of investment pressure will increase in the future, especially the relocation of investment bases from the United States, which is at increased risk due to the United States’ protectionist policy that also wants to attract more investment back to the United States . SCB EIC estimates that private investment in Thailand in 2025 will decrease by approximately 0.4 – 0.5 pp. due to increased uncertainty in global trade and investment.
Overall, SCB EIC assesses that the impact of the Trump 2.0 policy will pressure the Thai economic growth in 2025 to expand lower than the original trend. The main reason is that Thai exports are pressured by the slowdown in global trade volume and investment in Thailand that has not yet been able to fully benefit from the relocation of production bases from abroad. SCB EIC has assessed the impact of the Trump 2.0 policy on the Thai economy through a model that links the impact of the global economy according to the IMF study (Oct24) to the main channels of the Thai economy. It was found that Thai exports of goods and private sector investment will be the most affected by the increased trade and investment barriers .
The Thai economy in 2025 will decrease by approximately 0.5 pp. compared to the original trend before the US election results.
Although President Trump’s 2.0 policies, especially trade and investment protectionism, will pressure the Thai economy to expand lower next year , in the medium term, SCB EIC assesses that the impact of international protectionist policies in various dimensions will be an important factor that will accelerate economic polarization. Thailand may benefit from the changing global trade pattern, where countries with different economic poles will rely less on each other in trade and turn to rely more on countries with neutral stances. If Thailand can maintain its neutral role in the global geopolitical game, it may benefit from trade and investment diversion from countries with more polarization.
Source : Flash / Trump 2.0 : ผลกระทบต่อเศรษฐกิจโลกและไทย | SCBEIC
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