The Organisation for Economic Co-operation and Development (OECD) significantly lowered global economic growth forecasts following new tariffs imposed by US President Donald Trump.
The tariffs introduced against Canada, Brazil, Mexico, China, and the European Union are already causing economic damage, according to the OECDโs interim Economic Outlook Report released in March 2025.
Global Growth Set to Slow Down
The OECD expects global GDP growth to decrease sharply due to rising trade tensions and economic uncertainty caused by US-imposed tariffs.
Revised Global Growth Forecasts (2024โ2026)
| Year | Previous Forecast | Revised Forecast |
|---|---|---|
| 2024 | 3.2% | 3.2% (unchanged) |
| 2025 | 3.3% | 3.1% |
| 2026 | 3.3% | 3.0% |
US Economy Faces Reduced Growth
The US economy, previously performing strongly, faces slower growth amid the ongoing trade tensions. Businesses express worry about increased costs of goods, while investors brace for more uncertainty.
US Growth Projections
- 2025: Reduced to 2.2% (previously 2.4%)
- 2026: Reduced to 1.6% (previously 2.1%)
OECD Secretary-General Mathias Cormann stated that uncertainty over trade policies significantly affects investment and consumer spending. The organization advises a return to open markets and reduced trade barriers to restore economic stability.
The global economy was resilient in 2024, but signs of weakness are appearing against a backdrop of slower growth, inflation and policy uncertainty.
Today, Chief Economist @santospereira_a and I launched the OECD Interim #EconomicOutlook.
๐ https://t.co/pE41LLTEpX pic.twitter.com/tS2nizlfQr
โ Mathias Cormann (@MathiasCormann) March 17, 2025
Canada and Mexico Hit Hardest by Tariffs
Canada and Mexico face severe consequences due to recent US tariff increases of up to 25% on steel, aluminum, and various imported goods.
Economic Outlook for Canada:
- Growth forecast for 2025: 0.7% (previously 2.0%)
- Growth forecast for 2026: 0.7% (previously 2.0%)
Economic Outlook for Mexico
- Growth forecast for 2025: -1.3% recession (previously 1.2% growth)
- Growth forecast for 2026: -0.6% contraction (previously 1.6% growth)
These dramatic cuts highlight growing economic strain on both countries. Canadian firms have already begun boycotting US products, emphasizing more domestic production due to the trade conflict.
Inflation Concerns Rise Globally
Inflation remains elevated globally due to rising trade barriers and increased costs. Higher prices reduce consumer purchasing power and slow economic growth.
Inflation Forecast Changes:
| Region | 2025 (Previous) | 2025 (Revised) | 2026 (Revised) |
|---|---|---|---|
| US | 2.1% | 2.8% | Above Target |
| G20 | 3.5% | 3.8% | 3.2% |
Inflation in major economies, including the US, is expected to remain above central bank targets through 2026. Higher inflation may force central banks to maintain higher interest rates, placing further pressure on economic growth.
How Tariffs Impact Everyday Consumers and Businesses
Tariffs directly increase costs for both consumers and businesses:
- Higher Consumer Prices: Goods from imports become more expensive, raising costs of everyday products.
- Job and Income Uncertainty: Businesses slow hiring and investment plans, affecting job security and wages.
- Reduced Economic Activity: Trade uncertainty leads to cautious business decisions, decreasing overall economic growth.
OECD Recommendations to Avoid Economic Damage
To protect economies, the OECD recommends:
- Monetary Caution: Central banks should closely monitor inflation and remain prepared to adjust interest rates carefully.
- Fiscal Discipline: Governments must manage spending responsibly and maintain financial stability.
- Policy Reforms: Countries need policies to increase competitiveness, productivity, and labor market flexibility.
The OECD urges international cooperation, highlighting that reversing tariffs would quickly lead to improved global economic conditions.
Background: Why Has Trump Imposed Tariffs?
President Trump imposed tariffs to encourage American manufacturing, claiming it benefits the US economy and protects American jobs. However, experts warn tariffs negatively affect international trade and increase overall costs for consumers and businesses globally.
Additional Highlights:
- Tesla warned US exporters face significant risks due to retaliatory tariffs by other countries.
US automaker Tesla has warned that it and other major American exporters are exposed to retaliatory tariffs that could be leveled in response to President Donald Trump’s aggressive use of tariffs https://t.co/VAVtccBeRF pic.twitter.com/7fA6Qk9TED
โ Reuters Business (@ReutersBiz) March 14, 2025
- European countries such as Germany and the UK face slower growth due to economic uncertainty caused by tariffs.
