Trump tariffs shake global markets as OECD cuts growth forecasts

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 OECDโ€™s 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 (2024โ€“2026)

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.

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.

  • European countries such as Germany and the UK face slower growth due to economic uncertainty caused by tariffs.

References

Dylan Whitaker
Iโ€™m Dylan Whitaker, a journalist who loves digging into research and sharing stories backed by real data and insights. I explore all kinds of topics, from social issues and technology to culture and current events, always aiming to make complex ideas easier to understand. Iโ€™m passionate about turning numbers and research into stories that connect with people and help them see the bigger picture.