New forecasts from the Organization for Economic Co-operation and Development indicate that President Donald Trump’s trade war is poised to inflict more significant economic harm than earlier anticipated, impacting not only the United States but also the global economy.
On Tuesday, a report revealed that a coalition of 38 predominantly affluent nations has significantly revised its economic growth forecast for the United States in 2025, lowering it to 1.6% from the previously estimated 2.2% in March. The report also indicated that growth is expected to be even more subdued in the coming year. The report highlights the prevailing uncertainty and turmoil surrounding Trump’s tariffs, emphasizing their potential to inflict enduring damage globally.
The Paris-based organization pointed to increased tariffs, notably retaliatory tariffs placed on American exports, a deceleration in net immigration, and a significant decrease in the federal workforce.
The OECD has revised its projections for the global economy, now anticipating a significant slowdown to 2.9% growth for both this year and next. This marks a downgrade from earlier forecasts of 3.1% and 3%, respectively. According to the report, the statement is predicated on the expectation that global tariffs will hold steady at their mid-May levels.
In a recent statement, OECD Secretary-General Mathias Cormann highlighted a significant transition in the global economy, noting a shift from a phase characterized by resilient growth and decreasing inflation to one marked by increased uncertainty. ” The current climate of policy uncertainty is adversely affecting trade and investment, leading to a decline in both consumer and business confidence, and stifling growth potential.”
The OECD’s Economic Outlook report indicates that the anticipated slowdown will be “concentrated” in the US, Canada, Mexico, and China—countries significantly impacted by Trump’s new tariffs.
Since assuming office in January, the US president has increased import tariffs on the majority of America’s trading partners, targeting essential goods such as automobiles and steel. In the wake of a legal setback for his tariff plan last week, a series of steep “reciprocal tariffs” are set to impact numerous US trading partners starting July 9 unless an agreement can be reached with Washington.
The implementation of tariffs, characterized by their inconsistency and uncertainty, is impacting numerous businesses and consumers across the global economy.
The OECD has indicated that the recent US import taxes, alongside retaliatory trade measures implemented by China and Canada, are signaling a level of disruption that surpasses the US-China trade tensions experienced in 2018-19, which marked a significant trade war during Trump’s initial term in office.
The OECD has warned that the introduction of new levies could lead to increased inflation in the countries that implement them. It also advised that central banks, which typically raise interest rates to combat rising prices, should “remain vigilant.”
Trump has openly urged US Federal Reserve Chair Jerome Powell to reduce borrowing costs in America. Meanwhile, Powell has opted to hold off on any decisions regarding rate adjustments, choosing instead to assess the potential effects of the president’s tariffs on the nation’s economy.
