Economic harm and rekindled inflation due to Trump's tariffs, according to OECD statement
Uh oh! The Tariff Tango unfolding around the globe
Donald Trump's tariff policies are stirring a murky storm in the world economy, making life tougher for folks in the United States and beyond, while driving up prices, according to the Organization for Economic Cooperation and Development (OECD).
This ain't no walk in the park. The OECD's recent report is the grand entrance of global economists scrutinizing the potential fallout from Trump's policies on the U.S. economy and its trading partners.
It seems Trump's tariffs might strangle the global economy and kick-start inflation at a time when it's a powder keg ready to explode. Not a good look, bro, just as inflation threatens a comeback.
World trade has taken a beating thanks to the new import taxes the Trump administration slapped on a cornucopia of goods from nations far and wide. And let's not forget the fierce counterblows from U.S. trading partners. The uncertain climate these jabs create is leaving businesses cold-footed, unwilling to risk investments that could spur growth, says the OECD.
At the same time, consumers are feeling jitters, with their spending suffering as fear of returning inflation eats away their confidence. That's no good news for the U.S. and the global economy.
Τhe OECD calls this digital dance between governments and trade a "drag" on global activity, incomes, and regular tax revenues. They further explain that as new tariffs sink in, the price of imported goods will crumble consumers and businesses alike.
Looking on the Dark Side of the Moon
The OECD painted a gloomier outlook with its updated economic forecasts, and they ain't pretty. The U.S. economy is expected to slide dramatically this year and next, hitting 2.2% in 2025 and 1.6% in 2026. That's a steep drop from the 2.8% pace last year. Meanwhile, global economic growth is projected to grow 3.1% this year and 3% next year, down from 3.2% growth in 2024.
Price rises will also be on the rise in 2025, with inflation expected to top 2.8%, up from 2.5% in the last year. And the upward trend will continue in 2026, with inflation hitting 2.6%.
Inflation and economic growth projections for the U.S. are worse than in the previous quarterly report, and global economic growth was expected to clock in higher, at 3.3% this year.
Canada and Mexico get the raw end of the deal
The land of the maple leaf and the neighbor to the south are expected to take a significant hit in the brewing trade war. Trump promised 25% across-the-board tariffs on the U.S.'s comrades and two of its top three trading partners. A pretty big leap for both nations, and it could send them spiraling into recession.
The OECD predicts Canada's economy will expand just 0.7% this year and next, a big step down from a previously anticipated 2% growth in the December report. For Mexico, the economy is forecasted to shrink a whopping 1.3% in 2025 and 0.6% in 2026—a far cry from the previously anticipated growth numbers.
China, though, is predicted to be the tariff-resilient one in the bunch.
In the end, central banks will have their hands full when it comes to keeping things afloat. Although many worldwide have been slashing interest rates to ignite growth after the inflation crisis cools off, the OECD predicts that the rekindled inflation from tariffs might force banks to keep rates high, prolonging pain for businesses and consumers alike.
- The Organization for Economic Cooperation and Development (OECD) predicts that the prolonged outlook of the global economy, influenced by tariffs, could result in higher interest rates, being a challenge for both businesses and consumers.
- The business environment is expected to remain uncertain, with the OECD reporting that the tariffs implemented by the Trump administration are likely to drive up prices and discourage investments.
- According to the OECD, the projected economic growth rate for the U.S. in 2025 and 2026 is expected to drop significantly due to the impact of tariffs, with Canada and Mexico being particularly hard-hit, potentially leading to recession for both nations.
