The Organisation for Economic Cooperation and Development (OECD) has lowered its global growth forecast due to the ongoing trade tensions between the US and its neighbours. President Donald Trump’s tariff hikes will negatively impact the economies of Canada, Mexico, and the United States, while also driving up inflation.
According to the OECD, a generalised trade shock would result in slower economic growth, with the US economy projected to grow at 2.2% this year and 1.6% next year, down from previous forecasts of 2.4% and 2.1%. Canada’s growth rate is also expected to slow, contracting to 0.7% this year and next.
However, the OECD notes that China’s economy will be less affected by higher tariffs, with forecasted growth rates of 4.8% in 2025 and 4.4% in 2026. In contrast, the euro area is expected to gain momentum, growing at 1.0% this year and reaching 1.2% next year.
The OECD warns that a broader trade war would sap global growth further, with the US economy suffering a significant hit if tariffs are raised permanently by 10 percentage points. The direct cost to US households could be as much as $1,600 each, outweighing any potential benefits from increased tariffs.
Source: https://www.reuters.com/markets/trump-trade-war-sap-canadian-mexican-us-growth-oecd-says-2025-03-17