Thai Baht Expected To Weaken Against US Dollar Throughout 2025

In February 2025, the US raised tariffs on aluminum imports from 10% to 25%, escalating global trade tensions. Because of this and several other factors, the Thai baht (THB) is predicted to decline and impact Thailand’s currently resurging tourism industry and economy for the remainder of the year.

This will have knock-on effects for both local Thais and expats moving currency from the US to Thailand and vice versa.

Why the Thai Baht Is Expected to Weaken in 2025

On February 10, 2025, US President Donald Trump issued two proclamations that would modify the aluminum and steel tariffs he had originally imposed in 2018. The proclamations will raise the tariff on aluminum from 10% to 25%, as well as remove country-specific exemptions, quota agreements, and several product-specific tariff exclusions for both metals. 

Though the tariffs are expected to take effect on March 12, 2025, Thailand’s own currency, the Thai baht (THB), has already begun declining since the proclamations were announced. Within a week, the baht had reached its lowest exchange rate to the USD, from 33.64 to 34.07 THB per USD.

According to Poon Panitchpibun, a money market strategist at Krungthai Global Markets, the baht could remain volatile, depending on the US trade policies and economic data.

With the current economic conditions brought by the rising US tariffs and global financial uncertainty, the US Federal Reserve may postpone its policy rate cuts, which could further strengthen the dollar against the baht.

Other Factors Weakening the Baht

While volatility introduced into the global economy by the US government is having perhaps the strongest effect on the baht, it’s not the only one. Other contributing factors include:

• China, another of Thailand’s major trade partners, is also experiencing an economic slowdown which is placing pressure on regional currencies and curbing investment.
• Thailand’s political and economic uncertainty of 2024 has kept the economy sluggish even amidst steadily returning tourism.
• Geopolitical risks and regional tensions further contribute to economic uncertainty and weakened investor confidence.

What Does a Weaker Baht Mean for Foreigners in Thailand?

A declining baht has both benefits and drawbacks for foreigners, depending on their financial situation. Those earning in US dollars may find their purchasing power increase, while those relying on Thai baht or sending money abroad could face financial challenges. Here is a list of some of the most noticeable effects a weak baht might have on expats in Thailand:

• More Buying Power for US Dollar Earners: Individuals earning in US dollars, including retirees, digital nomads, and business owners, will find that their money stretches further in Thailand. As the baht weakens, each dollar exchanged yields a higher amount of Thai currency, providing an opportunity for an improved standard of living or reduced expenses in Thailand.
  
• Higher Tax Implications for Expats on US Income: While a favorable exchange rate increases purchasing power, it may also result in higher tax liabilities. Foreign income that converts to a larger amount of baht could push expats into a higher tax bracket.
  
• Less Favorable Exchange Rates for Those Sending Money Abroad: While a declining baht benefits those earning in US dollars, it presents challenges for individuals sending money out of Thailand. Whether supporting family overseas or making international investments, the weaker baht results in reduced foreign currency value. This may be particularly concerning for those planning to relocate or maintain financial commitments outside Thailand.
• Increased Costs for Thai Businesses and Imported Goods: A weaker baht leads to higher costs for imported goods and materials. Businesses that depend on imports may experience rising operational expenses. Because of this, inflation could drive up the prices of everyday goods and services, which will affect overall living costs in Thailand and reduce the purchasing power US dollar earners would initially have with the weakening baht.
  
• Tourism Growth and Increased Travel Opportunities: If Thai visa fees and government-related expenses remain fixed in Thai baht, their cost in US dollars could decline. A weaker baht may contribute to a rise in tourism as Thailand becomes a more affordable destination for international travelers. This could create additional business opportunities within the hospitality, food, and travel industries.

Professional Visa and Tax Consulting Services in Thailand

If you’re looking to take advantage of the dollar’s high exchange rate and travel to Thailand to make the most of your time here, get in touch with Siam Legal International. We are a full-service law firm and visa consultancy in Thailand with over 20 years of experience in helping both local and foreign clients with their legal and immigration needs.

Our Thai Immigration Team will review your travel plans and recommend the appropriate visa for your stay in Thailand. We’ll assist you through each stage of the application process, making sure the experience is smooth and hassle-free.

On the other hand, if you are a tax resident in Thailand and see that the higher exchange rate of the dollar might push you into a higher tax bracket, Siam Legal also has a team of tax advisors to help you navigate Thailand’s Revenue Department’s requirements. As we assess your personal income tax in Thailand, we will determine which deductions, credits, and Double Tax Agreements apply to your situation to legally reduce your tax liability.

To simplify and streamline your Thai visa application process or receive guidance on understanding your tax responsibilities in Thailand, do not hesitate to contact Siam Legal to book a consultation now!

Category: Current Events