The Organisation for Economic Co-operation and Development (OECD) has just released a new report with some concerning news for the global economy. The organization has lowered its growth projections for the next few years, highlighting how trade tariffs are affecting not just the United States, but also our neighbors, Canada and Mexico. With increased barriers to trade, the economic outlook is looking a bit gloomier than before.
Lower Projections for Global Economic Growth
According to the OECD, the global economic growth is projected to drop to 3.1% in 2025 and further decrease to 3.0% in 2026. This is a downward revision from earlier estimates that predicted a healthier growth rate of 3.3% for 2024 and 2025. This change is significant since it reflects the real impact of trade policies that have been put in place by countries, particularly the United States under President Trump.
Impact on U.S. Economy
The United States is expected to experience a slowdown in economic growth as well, with projections dropping to 2.2% in 2025 and 1.6% in 2026. Previously, the forecasts were for 2.4% and 2.1% growth in those years. The OECD points to trade policy uncertainty, especially disagreements with trading partners like Canada and Mexico, as substantial factors influencing these numbers.
Effects on Canada and Mexico
Things are looking particularly tough for Canada and Mexico. As trade tariffs escalate, Canada’s economic growth forecast has been slashed to just 0.7% for both 2025 and 2026, significantly down from an expected 2%. Mexico is in an even tougher spot, with predictions showing a contraction of 1.3% in 2025 and 0.6% in 2026. This could mean a rough road ahead for both countries.
Trade Policies Raising Concerns
The impact of tariffs is not just about numbers; they are reshaping how countries interact with one another in terms of trade. New tariffs imposed by the U.S. on steel and aluminum imports and other goods are increasing trade barriers. These policies create uncertainty, which can have far-reaching implications for businesses and consumers alike.
Inflation on the Rise
Another consequence of these trade policies is an expected rise in inflation. The OECD anticipates that inflation in the U.S. will reach 2.8% in 2025 and 2.6% in 2026. This is higher than previous forecasts. If inflation increases, it can affect the cost of living and purchasing power, making it more expensive for families and individuals to buy everyday items.
International Reactions and Retaliations
Countries are not just sitting back as tariffs rise. Canada and the European Union have announced retaliatory tariffs in response to the U.S. measures, which can create a vicious cycle of trade barriers and negative economic consequences. This back-and-forth can lead to what the OECD warns could be significant risks and further global economic fragmentation, affecting growth worldwide.
The Bigger Picture: Global Economic Outlook
While the OECD’s predictions for China’s economic growth have slightly improved to 4.8%, the overall landscape is challenging. According to the OECD, the mix of higher tariffs and increased geopolitical tensions are leading to a situation filled with uncertainty. As trade disputes continue, the need for constructive dialogue and solutions becomes more pressing, ensuring that the road to recovery remains open for everyone.
How Can We Respond?
For those worried about these economic changes, the best thing to do might be to stay informed and engaged. Understanding global economic movements can help people make better financial decisions. Communities can also support local businesses that might be affected and advocate for policies that promote fair trade and healthy economic growth.
