Wednesday
March . 19th . 2025
United States President Donald Trump's trade tariffs are hurting the whole world's economy, the Organisation for Economic Co-operation and Development, or OECD, reported on Monday.
The 38-member intergovernmental organization that advocates for the market economy said in its latest Interim Economic Outlook that it had downgraded its global economic growth prediction, with global GDP set to slide from 3.2 percent in 2024 to 3.1 percent in 2025 because of Trump's tariffs. The OECD said global GDP will likely slow further, to 3 percent, in 2026.
Before Trump's tariffs were announced, the OECD had predicted global GDP growth would hit 3.3 percent in both 2025 and 2026.
Trump introduced the tariffs to stimulate his own country's economy, but the OECD said they will damage it as well, with US GDP now expected to slump to 2.2 percent in 2025 and 1.6 percent in 2026 after it had been expected to stand at 2.4 percent this year and 2.1 percent next year.
There was a modicum of good news for the European Union, with the OECD saying it may not be hit as hard as first feared.
"European economies will experience fewer direct economic effects from the tariff measures incorporated in the baseline projections, but heightened geopolitical and policy uncertainty is still likely to restrain growth," the report added.
The Paris-based OECD said the United Kingdom's economy will likely grow by 1.4 percent in 2025, instead of the 1.7 percent that had been expected.
The UK's finance minister, Chancellor of the Exchequer Rachel Reeves, told Sky News: "This report shows the world is changing, and increased global headwinds, such as trade uncertainty, are being felt across the board."
Slower GDP growth will likely send the rate of inflation soaring in the G20 group of countries, up to 3.8 percent in 2025 and 3.2 percent in 2026, the OECD said. It had been expecting rates of 3.5 percent and 2.9 percent.
The organization said Canada and Mexico will be hit hardest by Trump's tariffs, with growth likely to be around 0.7 percent this year and next year in Canada when 2 percent had been expected for both years.
And it said Mexico could be hit the hardest of all, with the nation being forced into a recession because of the tariffs that look set to cut output by 1.3 percent in 2025 and 0.6 percent in 2026, when growth of 1.2 percent and 1.6 percent had been expected.
The OECD said ordinary people will pay the price of Trump's decision to impose tariffs, and that things could go from bad to worse.
"Further fragmentation of the global economy is a key concern," the report added. "Higher and broader increases in trade barriers would hit growth around the world and add to inflation. Higher-than-expected inflation would prompt more restrictive monetary policy and could give rise to disruptive repricing in financial markets."
The OECD said nations dislike Trump's tariffs but should consider uniting in their opposition, instead of responding with piecemeal tariffs of their own.
"Governments need to find ways of addressing their concerns together within the global trading system, to avoid a significant ratcheting up of retaliatory trade barriers between countries," the report said.