Global Economy Braced for Slowdown as US-China Trade Friction Cools Growth
Thailand's NESDC forecasts a slowdown in the world's two largest economies, citing rising import costs, labour shortages, and a downturn in electronics
- Global GDP growth is forecast to slow to 2.8% in 2026, with global trade volume also contracting, as a direct result of economic deceleration in the US and China.
- The US economy is projected to cool to 1.7% growth, driven by the inflationary impact of tariffs on consumers and labor shortages caused by tighter immigration policies.
- China's growth is expected to slow to 4.4%, as US tariffs weaken its export-driven manufacturing sector, an effect compounded by weak domestic demand and a property slump.
- A cyclical downturn in the electronics sector, exacerbated by policy uncertainty and China's own controls on rare earth minerals, is identified as a key factor contributing to the slowdown.
Thailand's NESDC forecasts a slowdown in the world's two largest economies, citing rising import costs, labour shortages, and a downturn in electronics.
The world’s two largest economic engines, the United States and China, are set to enter a period of deceleration in 2026, according to the latest analysis from Thailand’s National Economic and Social Development Council (NESDC).
Reporting on the council’s findings, Wasawat Odthawee noted that following a year of intense trade disputes in 2025, global GDP growth is now predicted to soften to 2.8% in 2026, down from 3.2% last year.
Global trade volume is also expected to contract to 2.3%, a significant drop from the 3.4% expansion recorded in 2025.
US Economy: Tariffs and Labour Constraints
The American economy is projected to expand by 1.7% in 2026, a decline from the 1.9% seen in 2025. This cooling is largely attributed to the delayed impact of protectionist trade measures and tighter immigration policies.
As the "effective tariff rate" rises, domestic producers are expected to pass increased import costs on to consumers, reigniting inflationary pressures.
Furthermore, stricter immigration controls are likely to result in a "tight" labour market, causing potential staff shortages in the construction, logistics, and service sectors. Analysts suggest this may force the Federal Reserve to halt its programme of interest rate reductions.
China: Weak Domestic Demand and Export Fatigue
In China, growth is forecast to slow to 4.4% in 2026, compared to 5% in 2025.
The cooling reflects a slowdown in industrial manufacturing and a drop in forward orders as the "surge" of exports seen in 2025 begins to fade under the weight of US tariffs.
Domestically, Beijing faces a prolonged slump in property investment and a high level of public debt, which is expected to limit the effectiveness of further government stimulus.
While the People’s Bank of China is expected to maintain a loose monetary policy to preserve stability, the NESDC warns that China’s own controls on rare earth minerals will likely disrupt global electronics investment.
Emerging Market Risks
The NESDC highlights several "headwinds" for the coming year, including a cyclical downturn in the electronics sector exacerbated by policy uncertainty.
Wasawat’s report further highlights that protracted conflicts in Ukraine and the Middle East continue to shadow global markets, while developing nations may face currency volatility as major central banks shift their monetary stances.
The council’s "base case" assumes that current trade barriers will remain in place throughout the year and that geopolitical tensions will not escalate into a major systemic shock.
