# Trade Protectionism Slows Global Recovery as China Struggles

- Link: https://www.thailand-business-news.com/china/206618-trade-protectionism-slows-global-recovery-as-china-struggles
- Published: 2025-04-08T03:20:04+07:00
- Author: News Desk

Rising trade protectionism hampers economic recovery in key nations, as the US grapples
with slower growth from tariffs, Japan battles persistent inflation, and China’s
economy remains vulnerable amid mounting uncertainties.

Escalation of trade protection measures adds pressure on economic recovery in major
countries; China faces risks on multiple fronts. These challenges include heightened
geopolitical tensions, disruptions in global supply chains, and a slowdown in domestic
demand. As nations adopt more inward-looking policies, the ripple effects are likely
to exacerbate uncertainties in international trade, further complicating China’s
efforts to stabilize its economy. Moreover, rising energy costs and inflationary
pressures could weigh heavily on both production and consumption, creating additional
hurdles for sustained growth.

ADVERTISEMENT

## US economy faces risk of slower-than-expected growth

US economy faces risk of slower-than-expected growth as Trump imposes 25% auto tariffs.
In March, the economy showed signs of weakening, with the Flash Manufacturing PMI
slipping into a contraction zone at 49.8, while the Flash Services PMI improved 
to 54.3. However, consumer confidence dropped to 57, its lowest level since November
2022.

The trade war escalation has heightened concerns about a sharper-than-expected US
slowdown due to higher import costs and weaker employment. This concern was reflected
in the US stock market, which fell over 3% last week amid worries about reciprocal
tariffs and 25% tariffs on all cars not manufactured in the US, to take effect on
April 3.

Such developments could trigger countermeasures from trading partners, adding risks
to trade and economic growth. Given these factors, Krungsri Research expects the
Fed to cut the policy rate three times this year, by 25bps each, bringing it to 
3.50%-3.75% by year-end, with the first cut likely in mid-2025.

## Japan

Japan’s recovery faces mounting challenges as inflation remains elevated and trade
tensions escalate. In March, the Flash Manufacturing PMI declined to 48.3, while
the Services PMI unexpectedly fell into contraction at 49.5. Inflationary pressures
remained, with Tokyo’s headline inflation rising from 2.8% YoY in February to 2.9%
in March, while core inflation climbed from 2.2% to 2.4%.

Japan’s recovery faces mounting pressure from high inflation and escalating trade
wars following US President Trump’s announcement of 25% tariffs on car imports.

This measure is expected to have a significant impact on Japan’s economy, as car
exports accounted for 28.3% of Japan’s total exports to the US in 2024. Japan has
stated that it is considering negotiations to address the issue while keeping open
the possibility of retaliatory measures against the US. Despite still-high inflation,
Japan’s recovery remains sluggish, suggesting that the BOJ is in no rush to raise
its policy rate, with a hike likely in the second half of the year.

## China

China’s domestic economy remains fragile, while external risks from trade wars are
intensifying. Industrial profits contracted by -0.3% YoY in January–February, down
from +11% in December. This aligns with retail sales, which grew by only 4%. Meanwhile,
the gap between the industrial production index and retail sales index has significantly
widened from pre-COVID levels during 2014-2019 (see chart).

### Related**Posts**

###  󠀁[What Would an ASEAN-Canada Free Trade Agreement Mean for Foreign Investors?](https://www.thailand-business-news.com/asean/331504-what-would-an-asean-canada-free-trade-agreement-mean-for-foreign-investors)󠁿

###  󠀁[The Changing Map of Growth: Why East Asia and the RCEP Are More Important Than Ever](https://www.thailand-business-news.com/opinion/328474-the-changing-map-of-growth-why-east-asia-and-the-rcep-are-more-important-than-ever)󠁿

###  󠀁[How China’s Innovation Drives the Transformation of Thailand’s Economy](https://www.thailand-business-news.com/china/325721-how-chinas-innovation-drives-the-transformation-of-thailands-economy)󠁿

###  󠀁[Thailand is rolling out a new EV tax structure linked to local manufacturing](https://www.thailand-business-news.com/asean/329565-thailand-is-rolling-out-a-new-ev-tax-structure-linked-to-local-manufacturing)󠁿

These indicators highlight headwinds for the economy, ranging from oversupply in
several industries and weak purchasing power. Moreover, export growth has slowed
noticeably (2.3% in January–February vs 6-11% in 4Q24).

Recently, the US announced 25% tariff hikes on auto imports, effective April 3. 
Our study found that its impact on China would be limited, with exports expected
to decline by 0.32% from the baseline. However, if the US imposes tariffs on auto
parts, the impact could be more severe.

February’s economy was boosted by a temporary rebound in export growth, while private
spending slowed down. The Fiscal Policy Office (FPO) reported that Thailand’s economy
in February was supported by merchandise exports, which continued to grow sharply
by 14% YoY. However, in the tourism sector, the number of international tourist 
arrivals to Thailand slowed to 3.12 mn (-6.9% YoY).

Private consumption growth showed signs of deceleration, mainly due to a decline
in durable goods spending. Similarly, private investment growth weakened, as reflected
by a drop in capital goods imports compared to the same month last year. This aligned
with industrial production, which contracted at a faster rate by -3.9% in February.

The outlook for the Thai economy remains clouded by uncertainty and risks stemming
from US trade measures, which could threaten export growth, a key economic driver
in early 2024. Recently, the US announced an increase in import tariffs on automobiles
by 25%, effective April 3.

Although the direct impact on Thailand may be limited, as Thai car exports to the
US account for only 1.6% of total Thai car exports, it is estimated that the move
could reduce Thailand’s overall exports by around 0.05%. Moreover, if the US proceeds
with serious implementation of reciprocal tariffs against countries with trade surpluses,
Thailand is among those at high risk of being targeted.

This could further affect Thai exports and manufacturing for the remainder of the
year. Thailand’s average tariff rate is 5-6% higher than that of the US, and with
the country’s VAT rate at 7%, US reciprocal tariffs on Thai goods could reach as
high as 13%, which could be the highest among ASEAN countries.

Government plans to boost domestic tourism amid concerns over short-term impact 
from earthquake. The latest tourism situation shows that between January 1 and March
23, Thailand welcomed 8.89 mn foreign tourists, a 2.9% increase year-on-year, generating
THB434.66 bn in revenue.

The top source markets were China (1,259,391 persons), Malaysia (1,057,438), Russia(
667,905), India (498,341), and South Korea (475,124). As for domestic tourism, during
the first two months of this year, there were 16.48 mn trips (+4.1% YoY), generating
THB 8.8 bn in revenue (+6.6%).

To help support a further recovery of the tourism sector following a slow return
of Chinese tourists, the Ministry of Tourism and Sports recently revealed that it
is considering launching a new phase of the “We Travel Together” campaign during
the low season (after the Songkran Festival).

The preliminary plan includes 1 mn participants, with a maximum subsidy of THB 3,000
per person. The government will cover 40% of expenses for travel to major cities
and 50% for secondary cities (excluding airfare). Additionally, the ministry is 
considering extending the visa-free policy for Chinese tourists but may reduce the
allowed stay from 90 days to 30 days, as most visitors typically stay for 10–15 
days.

Meanwhile, the impact of the recent earthquake is still being assessed, and it could
potentially affect the tourism sector, business and consumer sentiment, as well 
as overall economic activity.

Initially, the Association of Thai Travel Agents (ATTA) and the Thai Hotels Association(
THA) said that the short-term impact on Thailand’s tourism industry would stem from
safety concerns. They expected the number of international tourists to drop by 10%-
15% or even more in the next two weeks.

The global economic landscape is increasingly marred by the escalation of trade 
protection measures among major countries. Governments are resorting to tariffs,
import quotas, and other trade barriers in response to rising inflation, supply 
chain disruptions, and geopolitical tensions.

These protective actions are hindering international trade, stifling economic recovery
efforts, and creating an atmosphere of uncertainty that affects businesses and consumers
alike.

China, as the world’s second-largest economy, is not immune to these challenges.
The nation faces significant risks on multiple fronts, including heightened scrutiny
of its trade practices and the potential for retaliatory measures from trading partners.
Additionally, the growing rivalry with the United States exacerbates these risks,
impacting China’s export-driven industries and leading to a reevaluation of its 
economic strategies.

As trade protectionism continues to rise, the prospect of a robust economic recovery
becomes increasingly tenuous. For China and other major economies, navigating these
turbulent waters will require agility, diplomacy, and innovative approaches to trade
that can foster cooperation while addressing domestic economic concerns.