Plausible approaches include imposing tariffs, devaluing the yuan, reducing US treasury holdings,curbing imports, and others, such as banning US products. Any choice China selects to do, when necessary, would inevitably have adverse impacts on the global and Thai economies as well as financial markets.

Regarding the latest US-China trade intensifications, the US imposed higher tariffs on US$200 billion (Bt6.262.03 trIllIon)of goods imported from China and, later, threatened to further hike tariffs on additional $300 billion of Chinese goods following China’s tariff retaliation on merely $60 billion of US goods.

The sizeable gap between the values of goods tariffed by the two superpowers comes from the fact that the total value of Chinese products exported to the US is about 4 – 4.5 times that of US products exported to China. China’s direct tariff retaliation may not be a favourable solution given the huge gap in values. Also, those who bear the costs of imposed tariffs are indeed Chinese domestic producers and consumers, according to the recent IMF’s research that particularly studied the US-China case.

Moreover, China might decide to curb imports that the US heavily relies on China, like it is currently doing on soybeans. So far in 2019, US exporting soybeans to China has diminished by 83 per cent , compared to the previous year.

Alternatively, to alleviate the tariff consequences, the People’s Bank of China (PBoC) may intervene to devalue the yuan to offset the

increases in prices caused by the US tariffs and to improve international competitiveness. However, weakening the yuan comes with costs. For instance, in August 2015, yuan devaluation by 4.4 per cent in total over three consecutive days brought about tumbles in prices of especially Chinese and Asian financial markets.

The situation then became one of the worst months in several years of the Shanghai composite and other regional stock, currency, and commodity markets.

In the bond market, China could consider reducing its US treasury holdings in order to strike back against the US. China, which currently possesses as huge as US$ 1.12 trillion of US treasuries, is the largest foreign creditor of the US. Unanticipated and immense declines in China’s US treasury assets could result in significantly higher bond yields and borrowing costs in the US.

According to UBS, US treasury yields could rise by 0.4 per cent or 40 basis points if China gradually sell off its US government bonds. Nonetheless, this method might produce adverse consequences since it would strengthen the yuan against the US dollar and hurt domestic imports. Also, selling all US treasuries implies replacing them new alternatives. Currently, seeking for alternative assets that have low risks and high liquidity like US treasuries is proven to be a difficult task.

There are, also, other countermeasures regarding actions against US entities based in China. Examples include delaying customs operations, stalling regulatory processes, and denying visa applications of US businessmen.

Nevertheless, these options would reduce China’s international credibility and discourage foreign firms from doing businesses in China in the future.

Furthermore, in response to the blacklisting of Huawei by US authorities in the recent tech cold war, Chinese government could follow the campaign started from Chinese consumers to stop using devices from Apple by banning Apple products as a counteract measurement.

This action, however, could be harmful to certain supply chains in China as almost half of Apple’s entire production facilities are located in China. Additionally, as widely rumoured in the media, China might counter the US by limiting exports of rare-earth elements, which are crucial raw materials in advanced technology, to the US.

At present, as dominant as 80 per cent of the total imports of rare-earth elements to the US United States come from China.

Due to escalatory, prolonged, and seemingly unending US-China trade disputes, it is possible that China would retaliate against the US by perhaps picking one of the weapons upon certain pros and cons mentioned above.

Whichever approach China decides to choose for such retaliation could accelerate global risks, which, in consequence, assuredly raises concerns about economic growth and international trade and spikes volatilities in financial markets across the globe. Thus, investors should get prepared to encounter rising uncertainties from US-China trade retaliation.

Views expressed in this article are those of the author and not necessarily of TMB Bank or its executives. Biz Insight is co-authored by SIWAT NAKMAI and DUANGRAT PRAJAKSILPTHAI. They can be reached at tmbanalytics@tmbbank.com

The annual study analyses reported shipping losses over 100 gross tons (GT).

In 2018, 21 total losses of vessels were reported in Asia Pacific, down from 46 losses in the previous year, driven by a significant decline in activity in Southeast Asia, and reduced weather-related losses after quieter hurricane and typhoon seasons.

While this plummet in total losses is encouraging, the number of reported shipping incidents overall in Asia actually increased by 22 per cent in the past four years, according to analysis of data from 4,000 insured vessels by AGCS. However, this is due more to the sheer volume of ships that pass through the region, rather than below-par safety standards.

“We do typically see more incidents of groundings and collisions in Asia than in other locations around the world, but this generally reflects the higher levels of trade and where ship owners are trading,” said Tom Taberner, regional head of energy and marine Asia Pacific at AGCS.

“In many cases port infrastructure in Asia is new and there are many new or expanding ports in China, Korea, Japan and Malaysia among others. Newer infrastructure means fewer issues, better port operations and more up-to-date charts, which will address challenges.”

“The ministry may revise the country’s inflation rate following the rise in prices,” the Trade Policy and Strategy Office under the Commerce Ministry’s director-general Pimchanok Nan Vonkorpon said yesterday. The ministry had earlier forecast that inflation would rise in the country by 1.2 per cent for the whole year. However, it has been running between 0.7 per cent and 1.7 per cent.

However, May’s inflation was lower than the 1.23 per cent rate in April of this year, she said.

HSBC said that though Thailand’s inflation in May was higher than earlier estimates due to higher prices for fresh food, the underlying pressures remained muted with core inflation rising just 0.1 per cent m-o-m, seasonally-adjusted.

Meanwhile, financial stability concerns and weakening GDP growth imply the need for a steady policy rate, though macro-prudential tightening is still likely.

However, HSBC believed that the headline CPI managed to stay within the Bank of Thailand (BOT)’s 1-4 per cent target range for the third consecutive month. That bodes well for the trajectory of headline inflation this year. The faster-than-expected rise in fresh food prices was enough to offset a modest decline in energy prices.

“We expect headline inflation to average 1.0 per cent in 2019, with prices rising faster in the second half compared to the first half of the year,” HSBC research said.

Still, with underlying price pressures remain largely muted and core prices rising just 0.1 per cent month-over-month in seasonally-adjusted terms, the result is a slight improvement from the 0.0 per cent seen over the past seven months, said HSBC.

But there remains little evidence to suggest a sustained rise in core prices for the remainder of the year. HSBC expects the contribution of core prices to headline inflation will decline in the months ahead due to subdued domestic demand. This highlights the need for fiscal policy to spur domestic demand and lift growth amid a subdued external environment, said the report.

Overall inflation remained largely benign and HSBC does not expect it to factor significantly in the BOT’s policy rate decisions in upcoming months.

“We do expect slowing GDP growth and further downside risks to limit the BOT’s ability to raise rates further. Meanwhile, financial stability risks are likely to remain a concern, given rising household debt. This implies further macro-prudential measures ahead, with curbs on auto loans as the likely next step,” HSBC said.

The first is a tax measure to boost the use of biodegradable plastic packaging with the aim of reducing plastic waste. The companies that purchase this kind of packaging could deduct the expense of purchasing it from their taxes at the level of 1.25 times. This will cover the period of January this year to December 31, 2021, he said.

For example, if the company spent Bt100 purchasing biodegradable plastic, it could deduct Bt125 from taxes. The measure will help the government reduce its cost of dealing with waste, he said.

It is estimated that this measure will cost the government Bt1.3 billion in revenues but help promote the use of biodegradable plastic, he said.

The move will also help Thailand achieve its goal to become the Bio Hub of Asean, Nattaporn added.

The second tax measure approved by the Cabinet yesterday was a two-year extension of the period in which large companies that helped small and medium-sized enterprises could deduct expenses up to a certain amount, said Nattaporn. The extension will allow the deductions until December 31, 2020, instead of the original expiry at the end of December 2018.

The cabinet also approved a draft regulation of the Finance Ministry regarding a tax measure to support fundraising by the Government Housing Bank (GHB), allowing people to exempt from their personal income tax the interest income and lottery prizes from GHB’s lottery. It will come into effective on August 1, 2019.

The Cabinet also approves exempting from personal income tax the interest income from savings deposits with GHB, effective on July 1, 2019.

GHB plans to issue lottery savings worth Bt100 billion in this year through 2020. The first lot will be open to those with an interest in investing in the bank’s lottery in July. It would be open to all interested investors that make a bank deposit before the lottery is issued on August 1 worth Bt27 billion, the bank’s president, Chatchai Sirilai,said.

The bank will use the lottery funds to provide a lower interest rate mortgage loan for its customers worth up to Bt200 billion, with an interest rate not over 3 per cent a year, which is below what customers would normally pay for their mortgages with an interest rate of 4.75 per cent at this time, he said.

He added foreign investors showed a net buy of  Bt5.82 billion,  higher than other stock market in  the region which closed lower yesterday.

For example, Hong Kong shares closed down, reversing early gains from bargain-hunting as fears persisted of a global slowdown sparked by the US-China trade war.

The Hang Seng Index fell 0.49 per cent, or 132.34 points, to 26,761.52.

The benchmark Shanghai Composite Index ended down 0.96 per cent, or 27.80 points, at 2,862.28, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, lost 1.43 per cent, or 21.74 points, to close at 1,494.15 yesterday.

The Act will become effective on January 1, 2020 as Thailand implements its international obligations under the United Nations Security Council Resolution 1540 to counter the global proliferation of weapons of mass destruction.

The TCWMD Act places upon Thai Customs the task of controlling the export of goods that can be used for military ends or to produce weapons. The Act aims to prevent the goods from being acquired by sanctioned entities and/or used for the production of weapons of mass destruction abroad.

The specific goods that will be subject to the control measures depend on the goods lists, which are still under consideration by the Department of Foreign Trade (DFT). Three lists have been announced so far: a list with dual-use items (items with both a civil and military purpose), a list with military goods and a self-certification list. It is expected these lists will soon be published, prior to the Act coming into force.

In the first two lists, goods are classified with export control classification numbers (ECCN) in line with international agreements and the US and EU export control regimes. Exporters of these goods will have to request a licence from specified government authorities prior to shipping out and provide the reasons for export. Attempts to export in-scope goods without a licence will lead to blocked shipments at the border and penalties.

The self-certification list contains HS codes (customs tariff codes) that are also used in the traditional customs declaration process of goods during import and export. Exporters of goods with HS codes that match the HS codes on the list will have to self-certify the non-violent end-use of their products abroad. While self-certification can be considered as less burdensome, exporters must be able to support their assessment with evidence in case of Customs audits or queries.

Exporters will be able to know whether their products fall under any of the designated lists by making use of an online government assessment tool (e-TCWMD). The tool can already be tested, but is still subject to changes. Through the application of a detailed questionnaire and based on the exporter’s answers, the tool determines whether a product is subject to control measures (a dual-use item or military good). In addition, exporters can also fill out the HS code of their product and the tool will confirm whether this HS code is included in the self-certification list. In its final form, the tool will contain a platform for online licence application or self-certification.

Even though the final lists have not yet been announced, the DFT has already published some indicative lists with dual-use items and HS codes. The scope of products in the dual-use items list is very similar to the EU Dual-Use Regulation goods list.

In anticipation of the release of the definitive goods lists, exporting companies should start assessing their goods to determine risk categories and develop standard operating procedures for the goods identification and licence application process to prevent any disruption of their supply chain. Employees that handle in-scope products or those that are involved in the export process must receive training to become acquainted with this new aspect of their job.

There will be two types of licences – transactional licences and bulk licences (which are licences that apply for a longer period). Only companies with a qualified internal compliance programme (ICP) that adequately self-screens and monitors trade transactions will be able to apply for the bulk licence.

Apart from self-certification and export licence requirements, the TCWMD Act also contains a catch-all provision which allows Customs to block the export of any shipments it considers suspect. Exporters are therefore expected to screen their foreign business partners against sanctioned-party lists and must produce trustworthy information about the activities of the foreign buyers and the end-use of the product, especially in destination markets that are considered high-risk zones. Such comprehensive due diligence measures will allow the exporter to convince the authorities that their exports pose no danger or harm.

The Act will be enforced by means of civil, criminal and administrative penalties, against exporters who fail to comply with its provisions.

Contributed by Stuart Simons and Sujitra Sukpanich, Global Trade Advisory team at Deloitte Thailand. They can be contacted at ssimons@deloitte.com and ssukpanich@deloitte.comrespectively.