Unraveling the Consequences of Trump's Tariffs on Global Economic Growth in 2025
Global Economy Suffers Setback due to Trump's Tariff Measures, According to OECD
In the year 2025, the world economy finds itself caught in the crosshairs of a trade war, fueled by President Donald Trump's recurring import tariffs. The Organisation for Economic Co-operation and Development (OECD) has made it abundantly clear that these policies are stirring up unrest in global markets, potentially causing a drag on economic growth unless significant trade negotiations are resumed and substantial agreements reached.
In its latest economic outlook published on June 3, 2025, the OECD issues a grim warning: the global economy's foundation is wobbling due to the trade policies of the Trump administration, primarily the imposition of import tariffs.
These policies are not only injecting doubt into international trade, but they also have the potential to curb economic growth in both 2025 and 2026. Unless a consensus can be reached among major international trading partners, the OECD has revised its global growth forecast for 2025 down to 2.9%, a decrease from the 3.3% estimated in 2024 and the 3.1% projected back in March. This dismal outlook is due to concerns over the volatile and erratic nature of U.S. tariff policies, which have continuously evolved, been imposed, suspended, and reinstated, disrupting the often delicate balance of global supply chains.
The result? Many companies, sensing the looming threat of tariffs in July, accelerated their imports during the first quarter of 2025, leading to a sharp slowdown in economic activity across OECD countries. GDP growth among member states plummeted to a mere 0.1% in Q1 2025, marking the lowest figure since the Covid-19 crisis.
Even the United States, architect of these contentious trade measures, cannot entirely sidestep the fallout. The OECD now predicts that U.S. GDP growth will decelerate to 1.6% in 2025, down from its March estimate of 2.2%, and is expected to drop further to 1.5% in 2026-a significant decline from the 2.8% growth recorded in 2024. Contributing factors to this slowdown include elevated tariffs, counter-trade maneuvers from international partners, tighter immigration policies, and budget cuts to the federal workforce.
If the Trump administration moves forward with an additional 10% increase in tariffs on its key trading partners, the OECD advises that US economic growth could contract by 1.6 percentage points over the course of two years. In turn, global growth would shrink by nearly 1% during the same period, with countries heavily reliant on U.S. trade, such as Canada, Mexico, and China, being hit hardest by these economic tremors.
In other parts of the world, the outlooks for the Eurozone and China remain subdued. The OECD expects Eurozone growth to continue at a meager 1% in 2025, with a slight boost to 1.2% expected in 2026-a rate consistent with its earlier estimates. Meanwhile, China's economy, despite expanding at a brisker pace than most developed nations, is set to decelerate to 4.7% in 2025 and 4.3% in 2026, a downturn from previously projected figures.
Enrichment Data:
Despite showing resilience at the end of 2024, the global economy is now facing a period of heightened vulnerability. Mounting geopolitical tensions, unresolved trade disputes, and escalating fiscal burdens stemming from increased military spending and climate change initiatives are placing the world economy under enormous strain.
Border Crisis:
Meanwhile, on the international stage, border disputes between various countries, such as Thailand and Cambodia, are escalating, adding another layer of complexity to an already precarious situation. The intricacies of geopolitics often intertwine with economic factors, making a clear, cohesive approach to resolving challenges crucial for the prosperity of nations.
From an economic perspective, the current trade disputes present a critical juncture: the world either collaborates to address these issues and resume the momentum of global trade or risks plunging into a prolonged recession.
- TAGS
- OECD
- Trump Tariffs
- GLOBAL ECONOMY
- US
- China
- EU
- The OECD has warned that President Trump's tariffs on imports could have a significant impact on the global economy, potentially causing a drag on economic growth in 2025 and 2026.
- The policies, which have continuously evolved, been imposed, suspended, and reinstated, are not only injecting doubt into international trade but also have the potential to curb business growth.
- Given the volatile nature of US tariff policies and the unresolved trade disputes, the global economy is now facing a period of heightened vulnerability, with concerns over potential consequences in the areas of policy-and-legislation, finance, and general-news.
