Economic Impact of Trump's Tariffs Could Be More Severe Than Initially Predicted, According to OECD
Taking a Genuine Look at Trump's Trade War's Economic Ramifications
America, and the world, are set to feel the harsh brunt of President Donald Trump's trade war, as per the updated predictions by the Organisation for Economic Co-operation and Development (OECD). This revelation came in a report on Tuesday, painting a grim picture of economic progress.
The OECD, comprising 38 predominantly wealthy nations, has majorly slashed the 2025 U.S. economic growth forecast from the previously projected 2.2% to a bleak 1.6%. The Organization believes that growth will be even weaker in the following year. The report sheds light on the tumult and potential long-term damage that Trump's tariffs can cause.
The Paris-based organization cites higher tariffs, including retaliatory tariffs on American exports, a decelerating immigration rate, and a "substantial" reduction in the federal workforce as reasons for this bleak outlook.
Additionally, the worldwide economy is estimated to slow significantly, with growth predicted for 2.9% in both 2021 and 2022 - a downgrade from the previously foreseen 3.1% and 3%, respectively. The OECD assumes that existing tariffs worldwide will remain at their mid-May levels for this estimation.
"If every nation starts imposing tariffs... we end up in a world plagued by misery," OECD Chief Economist Alvaro Pereira told CNN's Zain Asher.
Trade has served as one of the vital engines of economic growth and prosperity during the past few decades, helping to lift "almost a billion people" out of poverty, Pereira asserts.
However, tariffs and the ensuing trade war have fueled uncertainty, according to the OECD's report. "The global economy has transitioned from a phase of resilient growth and falling inflation to a less certain path," OECD Secretary-General Mathias Cormann said in a statement.
"Current policy uncertainty is weakening trade and investment, eroding consumer and business confidence, and hindering growth prospects," added Cormann.
The OECD anticipates that the slowdown will primarily affected developed economies such as the United States, Canada, Mexico, and China - nations heavily impacted by Trump's new tariffs.
Since reclaiming office in 2021, the U.S. president has increased import duties on most trading partners and key goods, including cars and steel. Despite the tariff plan facing a legal stumbling block last week, a barrage of punishingly high "reciprocal tariffs" is set to hit many American trading partners from July 9 unless they can forge a deal with Washington.
The tariffs, their erratic implementation, and the uncertainty they inject into the global economy are causing widespread unease among businesses and consumers. The OECD cautions that the new U.S. import taxes, combined with retaliatory trade barriers erected by China and Canada, point towards "far greater disruption" than during the US-China trade tensions in 2018-19.
The OECD advises central banks to "remain vigilant" in light of the potential inflation caused by the tariffs. Trump, on the other hand, has publicly pressured the Federal Reserve Chair Jerome Powell to lower borrowing costs in America, while Powell has preferred to wait and see the impact of the president's tariffs on the world's largest economy before making any decisions on interest rates.
Contributing reporting by CNN's Sam Hudson.
- The trade war initiated by President Donald Trump is not only affecting the US economy but also causing ripples in the global economy, as shown by the OECD's prediction of a slowdown in general-news.
- The OECD report highlights that the US economic growth forecast for 2025 has been slashed from 2.2% to 1.6%, and this is partly due to the impact of tariffs on business and finance.
- The OECD also warns that the tariffs and trade wars are causing uncertainty and eroding consumer and business confidence, which could potentially disrupt the industry and politics of nations heavily impacted by the trade disputes.
