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Why is option A wrong here? I understand D is also very close in fact both A and D are very close, but the answer says "Suggests samurai feared their existing dress rules were losing force, but the passage never claims earlier laws were failing". But here option A also never claims that earlier laws were failing, it simply says that they feared the potential loss of power and which eventually led them to add new limits to block access to merchants, which again is exactly what is suggested in answer as well. Kindly help me out.

I don't really see the mention of fear in the passage, we cannot make an assumption that samurai "feared". That's exactly why option A is incorrect. Hope that helps!!

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The passage mentions, "to counter the perceived threat" about this, which is where fear could be interpretted as a valid concept since Shogun were threatened by merchants' behavior
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The passage mentions, "to counter the perceived threat" about this, which is where fear could be interpretted as a valid concept since Shogun were threatened by merchants' behavior
"To counter a threat" = intent. Not fear.

GMAT never lets you infer an emotional state (fear, anxiety) from a described action. That leap is out-of-scope, and A gets eliminated for exactly that reason.

Never ever ever ever ever bring outside info to answer GMAT Verbal.
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