Thailand Rejects Currency Manipulation Claims as US Tariff Talks Intensify

Why Thailand is pushing back on currency manipulation claims

Thailand’s finance minister Ekniti Nitithanprapas has rejected accusations that the country manipulated the baht, saying policy makers are not engineering an exchange rate for trade advantage. He said the Bank of Thailand has tools to manage volatility without using tactics that would distort the market. The message is aimed at calming investors and trade partners at a time when tariffs, debt burdens and uneven growth are challenging the economy.

The central bank underscored that its objective is exchange rate stability, not a fixed level for the baht. Officials say any operations in the market are meant to smooth disorderly moves, not to drive the currency to a predetermined rate. That stance aligns with new understandings with the United States that limit the types of measures each side considers acceptable in currency policy.

The finance minister also said the government will tighten scrutiny of illicit fund movements by December. Authorities want to impede flows that can destabilize markets, strengthen defenses against money laundering and reduce the risk that speculative funds add noise to the exchange rate. The announced steps signal that Bangkok is trying to manage financial stability concerns while keeping trade relations on track.

What Thai officials say is happening with the baht

Thai officials describe a cautious approach. They argue that monetary and exchange rate policy rely on standard central bank tools, such as liquidity operations and communication, rather than direct efforts to weaken the currency. The finance minister says the government does not intend to distort the market. The Bank of Thailand (BOT) has repeated that it does not aim for a trade advantage through the exchange rate.

In recent days, the US Treasury and the BOT agreed that macroprudential and capital flow measures, or the use of government investment vehicles such as pension funds, will not be used to target exchange rates for competitive purposes. Macroprudential rules typically include limits on leverage or mortgage lending that affect financial stability. Capital flow measures include taxes or controls on inflows and outflows. The shared understanding is designed to keep these tools from becoming covert exchange rate levers.

Thai authorities also committed to greater transparency around any foreign exchange market interventions. The US Treasury said Thailand and Malaysia will provide regular disclosures. Thailand’s central bank said these understandings do not change its exchange rate policy goal of stability. The aim is to show that any step the BOT takes is about market functioning, not about gaining an export edge.

What the new US tariffs mean for Thai exporters

Washington unveiled a new tariff framework this year, adding a 10 percent baseline duty to most imports and a layer of reciprocal tariffs that vary by partner. Early signals suggested a 36 percent duty for Thai goods. The United States later set a 19 percent tariff on imports from Thailand, which it said was in line with rates applied to several regional peers. Thai officials say they will keep pressing to narrow that burden, and the finance minister plans to seek lower rates on specific products.

The tariff story is central to Thailand’s outlook. Exports account for a large share of the economy, and the United States is Thailand’s largest single export destination. Tariffs raise the cost of Thai goods in the US market, reduce margins for Thai firms or their American buyers, and can shift orders to other countries. Sectors such as steel and aluminum face higher costs and tighter margins, while auto parts, plywood and furniture manufacturers report growing uncertainty about pricing and delivery schedules. Import dependent sectors like machinery and electronics also face pressure because input costs can rise at the same time that export demand softens.

Diplomacy is running in parallel with these trade frictions. Thai and US officials recently outlined a framework for closer trade cooperation, including a Thai pledge to remove tariff barriers on about 99 percent of US goods. Bangkok hopes that opening its market further to American products will ease bilateral strains and help make the case for tariff relief on Thai exports. That approach complements efforts to diversify export destinations and to support firms that need to adjust product lines or move up the value chain.

How Washington defines currency manipulation

The US Treasury evaluates trading partners using three broad signals: a large bilateral trade surplus with the United States, a material current account surplus, and persistent one sided intervention in currency markets. Meeting all three can draw scrutiny and potential labels. The core concern is whether a government is pushing down its currency to give exporters a cost advantage in foreign markets.

Thai officials maintain that this is not what they are doing. The BOT says it does not target a lower baht and that any exchange market activity aims to limit disorderly moves. Recent transparency commitments, along with the agreement not to use macroprudential or capital flow tools to drive the exchange rate, are meant to show that Thailand is operating within accepted practices.

For businesses, the distinction matters. A manipulation label can feed trade tensions and complicate corporate planning. A credible demonstration that intervention is limited to volatility management reduces the risk of fresh sanctions and helps firms plan around tariffs and currency moves rather than worst case political shocks.

Why the baht has been strong despite weak growth

The baht’s behavior reflects several cross currents. One factor this year has been gold trading. Thailand is a large physical gold market. When global prices rise, gold flows can increase dollar inflows and prompt conversions back into baht, which can lift the currency. This channel can be strong in episodes of risk aversion when global investors move into bullion and local traders realize gains. Officials have discussed technical changes that could reduce the baht’s sensitivity to gold flows, including encouraging more trades to settle in US dollars and reviewing taxes on physical gold transactions.

Investment and trade realignment also matter. Companies seeking to diversify supply chains away from China have eyed Thailand for new capacity in electronics, rail equipment and digital infrastructure. Those projects bring foreign direct investment and technology imports, and some add to the current account surplus over time. When combined with Thailand’s sizable foreign exchange reserves and a stable financial system, these flows can support the currency.

Global factors play a role. When the US dollar weakens or when markets expect US interest rate cuts, capital tends to shift into Asia, including Thailand. That can push the baht higher even if domestic demand is soft. A stronger currency helps reduce import costs, which can ease inflation pressures. The trade off is that it makes exports less competitive and can weigh on tourism receipts, since foreign visitors get fewer baht for their money.

What the Bank of Thailand can do without provoking Washington

The central bank’s mandate centers on price and financial stability. Within that scope, the BOT can adjust interest rates to support growth when inflation allows. Market participants expected rate cuts earlier this year as trade frictions mounted, and further adjustments remain possible if the outlook worsens. The bank can also use liquidity tools to keep credit flowing to households and small firms and to prevent a credit squeeze from amplifying a slowdown.

On the exchange rate, the BOT can continue to smooth excessive intraday and multi day swings without aiming for a specific level. It can also encourage more outward investment and the use of hedging tools by importers and exporters, which helps reduce one way pressure on the currency. The finance ministry’s plan to intensify scrutiny of illicit fund movements by December is another lever. Stronger anti money laundering enforcement, clearer reporting and closer supervision of high risk flows can make speculative surges less likely.

Beyond the immediate toolkit, officials are assessing market frictions that amplify volatility. Gold market practices are one example. Technical steps, such as promoting dollar settlement for certain trades and reviewing the tax treatment of physical trades, could lower the impact of gold flows on the baht without breaching any understandings with the United States. Policy makers also point to better data transparency around interventions, which can reassure trading partners that any actions are for stability rather than for competitive devaluation.

Industry reactions and risks to growth

Thai manufacturers and service providers are navigating two pressures at once. US tariffs raise the cost of reaching the country’s top export market, and a strong baht squeezes margins further. Industry groups say order books are more volatile and that pricing negotiations are taking longer. Exporters in metals and auto parts report that inconsistent tariff enforcement adds uncertainty to production planning. Import dependent firms in machinery and electronics face higher costs for components at the same time that their export prices look less attractive.

Business leaders have pressed for targeted relief. Proposals include postponing the classification of some loans as non performing to give firms extra time to adjust, restructuring credit to reduce near term debt service, and providing low interest loans that support modernization, innovation and greener processes. Advocates see value in alternative credit assessment tools, such as using data from e commerce or utility bills, so that smaller firms can access working capital in a tight cycle.

Economists warn that growth could slip below 2 percent this year if export volumes fall faster than expected and if tourism remains uneven. Exports account for a large share of GDP and roughly one fifth of shipments go to the US market. Research has also modeled worst case outcomes from tariff shocks that would shave a fraction of a percent off GDP. While the baht’s strength lowers some import costs, the hit to exports and services can more than offset those gains. The Bank of Thailand has taken the unusual step of convening formal consultations with industry groups to keep data and policy feedback flowing in both directions.

What businesses and investors should do now

Tariffs and exchange rates interact in complex ways. A weaker currency can make exports cheaper, yet US tariffs can erase that advantage. Planning for both costs at the same time is essential. Companies operating in Thailand and their US partners can reduce risk by adopting practical steps that respond to both tariff schedules and currency swings.

• Review contracts for tariff pass through language and adjust pricing models to reflect likely US duties and potential shifts in the baht.
• Diversify suppliers and markets where feasible, including sourcing from countries with lower US tariff rates or selling into markets that are not subject to new duties.
• Use foreign exchange tools such as forwards and options to hedge baht exposure, and set risk limits so that adverse moves do not disrupt operations.
• Align invoicing and settlement currencies with revenue and cost bases to reduce mismatches, and consider using natural hedges where possible.
• Monitor policy signals from the BOT and the US Treasury, as changes in rate expectations or disclosure rules can move currencies quickly.
• Run scenarios that combine tariff changes with currency moves, and prepare contingency plans for logistics, inventory and financing needs.

At a Glance

• Thailand’s finance minister said the country has not manipulated the baht and that policy aims to avoid market distortion.
• The Bank of Thailand says its goal is exchange rate stability and that any market actions are to smooth volatility, not to target a level.
• Thailand and the US agreed not to use macroprudential or capital flow tools, or government investment vehicles, to target exchange rates for competitive purposes.
• Thailand and Malaysia agreed with the US Treasury to disclose any foreign exchange market interventions to strengthen transparency.
• The US set a 19 percent tariff on Thai imports after earlier signals of a 36 percent rate. Thai officials will press for lower rates on specific goods.
• Bangkok outlined a framework that would remove tariff barriers on about 99 percent of US goods entering Thailand as part of broader trade talks.
• Gold flows, supply chain realignment and shifts in global rates have supported the baht, which benefits import costs but strains exports and tourism.
• Industry groups report tighter margins and uneven orders. Proposals include loan relief, targeted low interest credit and better access to working capital.
• The finance ministry plans tighter oversight of illicit fund movements by December to curb destabilizing flows.
• Businesses are advised to hedge currency risk, diversify suppliers and markets, and align contracts and pricing to reflect tariffs and currency moves.