Global Economy Slows Due to Rising Trade Barriers
The Organisation for Economic Co-operation and Development (OECD) has revised its global economic growth projections downward, citing increasing trade tensions and policy uncertainty. The world economy is now expected to grow 3.1% in 2025 and 3.0% in 2026, a slight decline from the 3.2% growth forecast for 2024.
U.S. Economic Growth to Decline
The OECD projects that the U.S. economy will expand by 2.2% in 2025 and 1.6% in 2026, a decrease from earlier estimates of 2.4% and 2.1%, respectively. The revised outlook reflects concerns over new tariffs and global trade restrictions affecting consumer spending and investment.
Tariff Impact on Trade and Inflation
The updated projections consider the possibility of an additional 25% tariff increase on goods traded between the U.S., Canada, and Mexico. If these tariffs remain in place, they could slow economic growth, raise consumer prices, and disrupt global trade. The OECD notes that easing trade tensions could improve economic prospects, but uncertainty remains high.
Canada and Mexico Face Sharp Economic Slowdowns
As key trading partners of the U.S., Canada and Mexico are expected to experience significant economic slowdowns due to new tariffs. Canada’s growth forecast has dropped to 0.7% in 2025 from the previous 2% estimate, while Mexico’s economy is projected to contract by 1.3% instead of the earlier predicted 1.2% expansion.
Inflation Forecast Adjusted Upward
The OECD now expects U.S. inflation to reach 2.8% in 2025, higher than the previous 2.1% estimate. Similarly, inflation in G20 economies is now projected to rise to 3.8% from 3.5%. The report warns that core inflation could remain above central bank targets in several major economies, including the U.S., through 2026.
Trade Policy Uncertainty Adds to Economic Risks
The OECD highlights that ongoing trade policy decisions and tariff negotiations are key factors influencing economic forecasts. The U.S. has announced several trade restrictions, with potential retaliatory measures from other countries, leading to higher costs for businesses and consumers. The organization warns that if these policies persist, they could further weaken global trade and economic stability.
Conclusion
The OECD’s latest economic outlook underscores the impact of trade tensions and policy shifts on global growth. While some uncertainty remains, the report signals slower growth, rising inflation, and potential disruptions in international trade. If trade relations improve, the global economy could regain momentum, but for now, businesses and consumers should prepare for economic challenges ahead.
