# Trade War Fuels Global Risks, Central Banks Mull Rate Cuts

- Link: https://www.thailand-business-news.com/banking/212312-trade-war-fuels-global-risks-central-banks-mull-rate-cuts
- Published: 2025-06-11T08:24:17+07:00
- Author: News Desk

The trade war poses risks to global economies, prompting central banks, including
the US Fed and ECB, to consider rate cuts. China faces challenges despite the stimulus,
while Thailand’s GDP growth may decline.

##  Key takeaways

 * Escalating global trade tensions are increasing recession risks and prompting
   central banks to consider rate cuts to stabilize growth.
 * The Fed remains cautious despite signs of a cooling U.S. economy, while the ECB
   has already begun easing amid mounting Eurozone pressures.
 * China and Thailand are relying on stimulus and diplomacy to counter trade shocks,
   but long-term risks remain without deeper structural solutions.

The intensifying trade war among the world’s major economies is stoking fears of
a broader global economic slowdown, prompting central banks to consider interest
rate cuts to maintain stability.

ADVERTISEMENT

Rising tariffs, disrupted supply chains, and policy uncertainty have pressured global
markets, with export-dependent economies in Asia and Europe facing heightened downside
risks.

In the United States, the Federal Reserve has signaled a cautious stance, with Chair
Jerome Powell noting the central bank is in no rush to lower interest rates. 

This comes despite signs of a cooling economy, first-quarter GDP projections from
the Atlanta Fed were revised sharply downward to a 2.2% contraction, and the Philadelphia
Fed’s manufacturing index dropped to -26.4 in April.

Consumer confidence has also declined amid concerns that new tariffs may push inflation
further from the Fed’s 2% target. Nonetheless, analysts, including Krungsri Research,
anticipate a rate cut by mid-2025, with the Fed Funds rate expected to fall to 3.50–
3.75% by year-end.

Meanwhile, the European Central Bank (ECB) has already moved to ease policy, cutting
its key deposit rate by 25 basis points to 2.25% in response to weakening economic
indicators. 

The Eurozone’s April ZEW Economic Sentiment Index dropped to -18.5, its lowest since
December 2022, while inflation remains muted. With the US planning new tariffs on
European medical exports, risks to the Eurozone’s recovery have increased, prompting
expectations of further rate cuts to 1.75% by year-end.

China has shown solid first-quarter growth of 5.4% year-on-year, aided by state 
stimulus. However, renewed tariffs up to 145% from the US and 125% in China’s retaliation
pose significant risks. 

Export momentum may fade, especially as youth unemployment remains elevated at 16.5%.
Authorities are likely to intensify fiscal support to meet the government’s 5% growth
target for 2025.

In Thailand, twin shocks from US tariffs and a March earthquake are pressuring the
economy. While the Bank of Thailand has maintained rates for now, further cuts are
expected if headwinds persist. 

### Related**Posts**

###  󠀁[USD to THB Exchange Rate Today: Thai Baht Moves with Global Market Trends](https://www.thailand-business-news.com/banking/331689-usd-to-thb-exchange-rate-today-thai-baht-moves-with-global-market-trends)󠁿

###  󠀁[Bank of Thailand Unveils Framework to Shield Financial Sector from Illicit Activities](https://www.thailand-business-news.com/banking/328409-bank-of-thailand-unveils-framework-to-shield-financial-sector-from-illicit-activities)󠁿

###  󠀁[Tokenised Deposits vs Stablecoins: Why Thailand’s Cautious Path Differs from Hong Kong and Singapore](https://www.thailand-business-news.com/banking/321239-tokenised-deposits-vs-stablecoins-why-thailands-cautious-path-differs-from-hong-kong-and-singapore)󠁿

###  󠀁[Thailand’s economy in July saw growth, boosted by the momentum of the global technology and AI cycle](https://www.thailand-business-news.com/banking/326128-the-thai-economy-in-july-expanded-from-the-previous-month)󠁿

The Thai government is actively negotiating with the US to reduce trade tensions,
including proposals to cut its trade surplus over five years.

As global trade tensions mount, central banks are increasingly leaning toward monetary
easing to cushion the impact. 

However, experts caution that rate cuts may only provide temporary relief without
structural solutions to the root causes of the trade disputes.