As American inflation is rising, Asian inflation (except for Japan and Bangladesh) has fallen. In fact, prices in both China and Thailand are falling, many other countries within Asia are also falling. My own personal theory going into this article was that the Tariffs are playing as a demand shock, which gives a higher amount of supply, thus making the goods less valuable. However the article contends that firms "frontloaded" shipments before tariffs were in place, where exports to America had widely increased whereas the prices increased moderately compared to G20 countries and started dipping into the negatives as of late.
1. China's overcapacity causing domestic inflation while spreading deflation to countries reliant on Chinese goods. "China’s export-price index has fallen by 15%, even as exports have risen. Although the spillovers are global, Asian economies have probably been hit hardest. Over the same period, China’s goods-trade surplus with developing countries in Asia has almost doubled."
2. Commodity markets for fuel and food have been cooling down. "The decision of the Organization of the Petroleum Exporting Countries and its allies to ramp up drilling has kept oil prices quiescent. Meanwhile, food inflation—which has been high for years because of the war in Ukraine and damage to harvests from hot weather—has subsided."
3. Demand within Asian countries has been weakening over time, while business cycles are not as fruitful as they had hoped.
4. Wage growth within Asia has deaccelerated.
The article does, however, state that the Tariffs (if they are not adjusted or repealed) will further entrench the cooling of inflation.
Source: https://www.economist.com/finance-and-economics/2025/09/01/the-threat-of-deflation-stalks-asias-economies
3 comments:
It's interesting to see how multiple factors are stacking up to create deflationary pressure in Asia. The point about China's overcapacity really stood out; falling export prices spreading deflation to neighboring economies highlight how interconnected the region is. At the same time, slower wage growth and weaker domestic demand suggest this isn't just about global trade but also internal structural issues. It makes me wonder whether deflation in Asia could actually offset some of the inflationary pressures in the U.S., or if the two trends will stay separate.
This was an interesting article theorizing why there was a deflationary period. I was shocked to see that drilling has increased to keep up with demand, but food scarcity has worsened. More efforts are needed to increase food production so there is more stability in growth rates, inflation, and unemployment. Will the government step in to improve the financial crisis or let the markets figure it out?
You did a great job summarizing the article and clearly laying out the four main causes of the deflationary period. I especially like how you included direct evidence, such as the statistic about China’s export-price index and the mention of OPEC’s drilling decisions — that really helps support the points being made.
Do you think governments should intervene with new policies (like adjusting tariffs or changing interest rates) to fight deflation, or should they allow markets to naturally correct themselves over time?
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