Donald Trump\u2019s tariffs<\/a>. In theory, they should hit Asia as a demand shock, reducing both export prices and output. That, though, is not what has happened in recent months. Instead, firms \u201cfrontloaded\u201d shipments before the tariffs came into force, with the result that many Asian countries\u2019 exports to America soared. And Asia\u2019s missing inflation in any case dates back to the second half of 2024, before Mr Trump was re-elected (see chart). His tariffs might tug down prices in the future, but they do not explain the past year.<\/p>\n ![\"Chart\"](\"https:\/\/www.europesays.com\/ie\/wp-content\/uploads\/2025\/09\/The_threat_of_deflation_stalks_Asia_economies_1756803801940.png\" "\\"Chart\\"\/")
Chart <\/p>\n
What does, then? One culprit is Chinese overcapacity, which has entrenched deflation domestically. It has also put pressure on prices elsewhere: since 2022 China\u2019s export-price index has fallen by 15%, even as exports have risen overall. Although the spillovers are global, Asian economies have probably been hit hardest. Over the same period, China\u2019s goods-trade surplus with developing countries in Asia has almost doubled. Prices of cars in Thailand, where cheap Chinese models increasingly dominate, fell by 6% in the year to July. Relentless competition from Chinese smartphone makers has dragged down the prices of these in Vietnam and Singapore.<\/p>\n
Commodity markets, chiefly for fuel and food, have also exerted a cooling effect. The decision of the Organisation of the Petroleum Exporting Countries and its allies to ramp up drilling has kept oil prices quiescent. Meanwhile, food inflation\u2014which has been high for years because of the war in Ukraine and damage to harvests from hot weather\u2014has subsided. As recently as 2024 the average food-inflation rate in Asia\u2019s ten biggest economies (again excluding Japan and Bangladesh) was 5%. By July it had fallen to 1%. The speed of the decline is not only due to \u201cbase effects\u201d, meaning that the current inflation rate is calculated using last year\u2019s high prices as a starting point. A surfeit of pigs in China has resulted in pork-price deflation, which Chinese officials have recently pledged to combat by shrinking herds by 1m.<\/p>\n
What is more, demand in many Asian countries is weak. Some places, including South Korea, are experiencing business-cycle slumps. In others, sluggish demand reflects structural flaws in their economies. Indonesia\u2019s increasingly uncompetitive manufacturing sector has been laying off workers, denting consumer confidence.<\/p>\n
Wage growth across Asia has been decelerating. In several countries a growing supply of workers has put downward pressure on wages, notes Miguel Chanco of Pantheon Macroeconomics, a consultancy. Labour-force participation has surged in the Philippines and broken records in India, Indonesia and Malaysia. Fresh memories of the global inflationary surge of 2022, to which most Asian households were painfully exposed, may have pushed more people to seek work. Asia\u2019s central bankers also seem fearful of a repeat. In general, their monetary policy is too restrictive given threats to demand, says Alex Holmes of the Economist Intelligence Unit, our sister company.<\/p>\n
Expect Mr Trump\u2019s tariffs to entrench the low-inflation trend. As the levies sap American demand for Asian exports, they will also intensify a race to find new markets. A dash to cut prices could well follow. For consumers battered by recent cost-of-living shocks, falling prices may seem like good news. In reality, they are a symptom of Asia\u2019s faltering economic health.<\/p>\n","protected":false},"excerpt":{"rendered":"Just as the inflationary heat is rising again in America, much of Asia is feeling a chill. Leave…\n","protected":false},"author":2,"featured_media":39422,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[30195,79,30193,14625,179,18,30194,13353,19,17],"class_list":{"0":"post-39421","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-asian-economies","9":"tag-business","10":"tag-chinese-overcapacity","11":"tag-deflation","12":"tag-economy","13":"tag-eire","14":"tag-export-price-index","15":"tag-food-inflation","16":"tag-ie","17":"tag-ireland"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/39421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=39421"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/39421\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/39422"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=39421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=39421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=39421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"People](\"https:\/\/www.europesays.com\/ie\/wp-content\/uploads\/2025\/09\/Thailand_market_1756804201397_1756804208156.jpg\" "\\"People")
PREMIUM People shop at a market in Bangkok, Thailand, August 24, 2025. (REUTERS) <\/p>\n