Thailand's industrial sector is confronting a difficult second half of the year, marked by impending negotiations regarding US import tariffs and ongoing domestic challenges such as political unrest and high household debt levels. The Office of Industrial Economics (OIE), part of the Industry Ministry, has called on businesses to adapt to these conditions, outlining six strategic approaches to navigate potential economic headwinds.

OIE Director-General Passakorn Chairat acknowledged the positive aspects of the overall economic landscape, while emphasizing the uncertainties facing the industrial sector. A major concern is the potential for increased US import tariffs, which could adversely affect international trade.

Industrial confidence has seen a decline, particularly noted in May, prompted by several factors including:

• Strong Thai Baht: The appreciating currency has diminished the competitiveness of Thai exporters in the global market.
• Increased Cheap Imports: There has been a notable influx of affordable products from China, which, after facing tariffs in the US, are now penetrating new markets, including Thailand, thereby intensifying domestic competition.
• Stagnant Private Consumption: High levels of household debt contribute to cautious consumer spending, directly impacting sales of industrial goods.
• Tourism Slowdown: A combination of factors, including call center scams, a recent earthquake, the promotion of domestic tourism in China, and perceptions of Thailand as a costlier destination compared to competitors, have adversely affected the tourism sector, which is vital for the economy.

Passakorn pointed out that ongoing tariff negotiations with the US, led by Deputy Prime Minister and Finance Minister Pichai Chunhavajira, are critical. Although Thai car exports to the US are relatively modest, a tariff rate below 10% would be favorable. Conversely, a worst-case scenario where US tariffs rise to 36% could potentially reduce Thailand's industrial GDP by as much as 1.02%.

The OIE indicates that the Manufacturing Production Index (MPI) is expected to reflect growth in June, bolstered by increased orders ahead of possible US tariff implementation and robust performance within the automotive sector. Despite a reported contraction of 0.29% in the first five months of 2025, the OIE maintained its full-year MPI forecast at a range of 0.5-1.0%, supported by strong automotive production and exports, particularly in sectors linked to electric vehicles.

Investor confidence is anticipated to hinge significantly on the outcomes of US tariff negotiations, which require careful observation. In response to the looming challenges, the OIE recently convened discussions with various economic entities, where stakeholders from the private sector underscored the necessity for prompt government action.

Several economic institutions have subsequently revised their GDP growth forecasts downwards, with the National Economic and Social Development Council (NESDC) adjusting its projection from 2.8% to 1.8% for the year.

Passakorn articulated concerns over unpredictable risks for the second half of the year, including the implications of US tariffs. He noted that geopolitical tensions, despite some easing in the Middle East and the Russia-Ukraine conflict, remain a notable concern. Furthermore, the ongoing surge of foreign goods into Thailand is expected to persist, as nations impacted by US tariffs continue to seek new markets.

Domestically, factors such as a fragile economy and high household debt are exacerbating reduced consumption rates. Concurrently, the decline in foreign tourist arrivals due to safety concerns, coupled with China's domestic tourism strategies, presents ongoing challenges for Thailand’s recovery.

To assist businesses in responding to this complex economic landscape, the OIE and private sector representatives recommended six strategies for adaptability:

1. Seek New Markets: Target emerging online and offline opportunities in sectors like the Halal market and expand into Muslim-majority regions, particularly in Central Asia and the Middle East.
2. Boost Production Efficiency: Invest in technological advancements aimed at reducing operational costs and enhancing manufacturing capabilities.
3. Uphold Standards and Trust: Maintain and emphasize the quality reputation of "Made in Thailand" products in the global market.
4. Innovate and Differentiate: Focus on sectors catering to an ageing population and explore unique selling propositions within health and pet industries.
5. Strengthen Supply Chain Collaboration: Develop more resilient and robust supply chains.
6. Monitor Government Measures: Stay informed about government policies and support programs that may alleviate economic pressures.

The OIE stressed the importance of closely monitoring US negotiations in the latter half of the year while also adapting strategies to reduce costs and capitalize on emerging opportunities amid ongoing global economic volatility.