Trade Tensions Take a Toll: OECD Slashes Global Growth Forecast Over US Tariffs
Sluggish Global Economic Growth Amplified by U.S. Tariffs, as per OECD Estimates
Here's a lowdown on the latest economic predictions: The Organization for Economic Co-operation and Development (OECD) has revised down its global growth forecast, citing the considerable influence of US trade policies as the main cause. The organization anticipates a growth rate of 2.9% in 2025 and 2026 - a noteworthy decrease from the earlier projection of 3.1% for 2023 and 3.0% for 2024.
The economic slowdown is expected to be most pronounced in the US, Canada, Mexico, and China. In a press release on Tuesday, the Paris-based institute warned that the worldwide economic outlook is becoming less optimistic and risks further deterioration due to various factors:
- Trade Barriers Galore: The rise in trade barriers, particularly the US tariffs, has pushed up costs for businesses and consumers, driving inflation and constraining economic growth[1][2][3].
- Policy Uncertainty: The ongoing trade policy uncertainty is causing a ripple effect, affecting business and consumer confidence, discouraging investments, and trade, thereby weakening overall economic prospects[1][3].
- Inflation Risks: Besides slowing down economic growth, the tariffs also contribute to inflationary pressures. The OECD has forecasted higher inflation rates, with US inflation potentially reaching 3.9% by the end of 2025[2][3].
While the OECD retained Germany's growth forecast at 0.4% for 2023, it predicted moderation for 2026, with growth reaching 1.2%. In the US, the gross domestic product (GDP) is now expected to grow by a mere 1.6% in 2025, a noticeable decline from the previously anticipated 2.2% [2]. For 2026, the growth rate is projected to slide further to 1.5%.
Notably, US President Donald Trump, a proponent of hardline trade policies since his second term, has claimed that tariffs have been beneficial for the US economy. On Truth Social, he asserted before the release of the OECD report: "Our economy is thriving due to tariffs!" Despite this optimistic outlook, it appears the OECD's forecast raises concerns over long-term economic consequences of maintaining high tariffs[1][4].
The ongoing trade policy uncertainty, influenced by the US tariffs, raises concerns over community and employment policies as business and consumer confidence may deteriorate, impacting employment opportunities. The Organization for Economic Co-operation and Development (OECD) anticipates inflation rates to increase, with potential implications for overall finance, business, politics, and general-news sectors due to rising costs.
