OECD’s Dire Warning: Global Economy Faces Widespread Slowdown Due to Tariffs

The Organization for Economic Co-operation and Development (OECD) has issued a sobering assessment of the global economy, significantly reducing its growth forecasts amidst escalating trade tensions. The 38-country group now projects global economic growth to slow from 3.3% in 2024 to 2.9% in both 2025 and 2026, a notable drop from the 3.1% previously anticipated for those years. This revised outlook paints a bleak picture for the world’s economies.
The report directly attributes this downgraded outlook to the current trade war, emphasizing that its negative effects will be felt almost universally. “Weakened economic prospects will be felt around the world, with almost no exception,” the OECD warns, predicting a decline in income and job growth. The United States, Canada, Mexico, and China are specifically highlighted as significant drivers of this global economic slowdown.
Beyond growth, the OECD expresses concern over the inflationary impact of protectionist policies. Tariffs, rather than promoting domestic prosperity, are expected to lead to higher prices for goods and services, ultimately burdening consumers. This inflationary risk is particularly acute for developing countries, which are already grappling with substantial debt and may find it challenging to manage increased costs and financing needs.
To mitigate these risks, the OECD urges central banks to remain attentive to inflationary pressures, even if immediate interest rate hikes are not foreseen. The Bank of Canada, for example, is advised to maintain a watchful stance. Furthermore, the report stresses the vital role of increased investment in revitalizing economies and strengthening government finances, acknowledging that debt-laden governments may face hurdles in funding essential projects.