Trump's Tariffs Pose a Threat to Global Economy, Cautions OECD
Economic Impact: OECD Warns of Potential Damage from Trump's Tariffs
An economic downward spiral looms as the Organization for Economic Cooperation and Development (OECD) recalculates its growth forecasts, particularly for the United States, due to the protective tariffs put in place by President Trump. The OECD has sounded the alarm, claiming that these tariffs will have a significant global impact on economic activity, dimming its global growth outlook, especially in the U.S.
"We've scaled back growth for nearly every economy worldwide" thanks to tariffs, OECD chief economist Alvaro Pereira told AFP in an interview. The OECD further explained, "Trade is affected, particularly consumption and investment." The organization, comprised of 38 developed countries, will convene for a ministerial meeting in Paris on Tuesday and Wednesday, and discussions over tariffs between American and European officials, along with a G7 meeting focusing on trade, are anticipated during this gathering.
President Trump sent shockwaves through the global economy upon entering office when he launched a trade war by imposing punitive tariffs on trading partners.
The uncertain environment crafted by Trump's pronouncements, often followed by pauses but also sudden increases, such as his decision last Friday to double the tariffs on steel and aluminum to 50%, has had a profound impact on economic activity. To the OECD's surprise, economic activity had previously benefited from an "Trump effect" in the form of increased trade at the end of 2024 and the first quarter of 2025, according to their predictions. However, the OECD now cautions of signs pointing to a decline in these outcomes, citing the steep decrease in shipping prices between Shanghai and the United States, a direct consequence of the trade dispute between China and the US.
The Paris-based institution has voiced concern about the effects of Trump's tariffs on the global economy, expressing particular concerns for the US. With the US being a significant export market for multiple countries, the OECD highlighted figures such as 75% for Mexico and Canada, 19% for Japan, 13% for China, and 10% for Germany.
A Closer Look at the Economic Impact
United States: A Tariff-Related Tug of War
In addition to the trade war, the OECD predicts, "a new contraction in net immigration and a reduction in the number of federal government employees should weaken US growth." Furthermore, inflation in the United States is anticipated to remain high, clocking 3.2% in 2025 and 2.8% in 2026—a full point above the eurozone inflation rate, still due to tariffs.
To target US industries and businesses, Trump has thrown multiple punches. The eurozone, on the other hand, has thus far escaped a fresh downward revision of its growth forecast, with the OECD foreseeing 1% GDP growth in 2025, despite heightened pessimism for the region overall. Japan, on the contrary, has had its growth forecast revised downward to 0.7% from 1.1% in March.
Steering the Global Economy Forward
The fight for economic survival and growth escalates as global trade relationships face unprecedented challenges. The wisest course of action for nations may well lie in investing in domestic industries, fostering technological innovation, and forging strategic international partnerships to counter these economic assaults aimed at disrupting the established trade landscape.
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[1] "Global Energy Outlook to 2050" (IEA, 2019)[2] "IMF Lowers Global Growth Forecast due to Trade Tensions" (CNN, 2019)[3] "Households to Pay nearly $1,200 More in 2025 due to Tariffs, According to OECD" (Reuters, 2025)[4] "Supply Chain Disruptions due to Tariffs Threaten Global Economy" (The Guardian, 2019)
"In light of the trade disputes, scholarship opportunities addressing the impact of tariffs on finance within business sectors might become increasingly relevant for students researching global economics."
"With the US facing a potential decline in economic activity due to tariffs, finance officials and business leaders may need to reevaluate their strategies to manage the increased costs associated with these protective measures."
