James was booked for simulation following a challenge from Joao Moutinho and subsequently booed every time he touched the ball at Molineux on Monday night.
Giggs, however, believes the youngster needs protection from referees as he makes the step up to the Premier League.
"You've seen he gets kicked a lot," Giggs said after naming James in his 26-man squad for next month's crunch Euro 2020 qualifier against Azerbaijan in Cardiff.
"Sometimes when you anticipate it, it can look like a dive," explained Giggs. "The speed he's going at... it can look worse, but I'm not worried about that.
"He gets a lot of stick and referees need to protect him.
"I think when you are a front player or a wide player you are going to get kicked, and Dan does get kicked a lot.
"I think it's a tough job for referees but when you try and anticipate it, it can look worse than it is."
Monday night's Premier League draw at Wolves was James' first start for United following his £15 million ($18m) summer move from Swansea City.
Despite the criticism for alleged simulation, Giggs has impressed with the youngster's progress, stating: "I watched a lot of the pre-season games and he did well as he usually plays on the left.
"It gives me a different option as well if he's playing his club football on the right. If I want to do that I can."
Meanwhile, Sky Sports pundit and former United full-back Gary Neville has praised the youngster for his impact at Old Trafford.
"If he gets one-on-one it is obscene the pace he's got," Neville said. "He makes six, seven, eight yards in the space of 25 yards.
"The big challenge for him is how does he cope when teams are playing deep, when there are five spread across the back."